You are here

Feed aggregator

Monsanto's fraudulent tomato patent revoked by patent office

Natural News - Tue, 12/29/2015 - 02:00
(NaturalNews) In an effort to help consumers make smart food decisions and not be strong armed into choosing edibles produced by a select few shady mega-corporations like Monsanto, No Patents on Seeds! has made significant strides. The coalition made tremendous headway when they,...

Deception: Major tortilla chip brand using 'No GMO' label on contaminated product

Natural News - Tue, 12/22/2015 - 02:00
(NaturalNews) The nonprofit consumer advocacy group Consumer Reports has released a new report on genetically-modified organisms (GMOs) that warns of inadvertent deception and possible outright fraud in non-GMO claims that aren't certified by independent third parties such as the...

Itchy bum? Common causes and simple solutions

Natural News - Tue, 12/01/2015 - 02:00
(NaturalNews) An itchy bum can almost certainly be found at the top of the "taboo health topics" list, but don't fret -- it's a common problem that may be contributed to a few minor causes. In some cases, the cause of an itchy anus is a bit more serious and may require treatment from...

Oct 13/gold rises in regular comex time zone but shoots higher on poor JPMorgan results/Dave Kranzler discusses the upcoming paper gold/silver scandal/

Harvey Organ - 34 min 23 sec ago

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1165.80 up 0.90   (comex closing time)

Silver $15.90  up 4 cents.

In the access market 5:15 pm

Gold $1168.90

Silver:  $15.91

First, here is an outline of what will be discussed tonight:

At the gold comex today,  we had a very poor delivery day, registering 0 notices for nil ounces  Silver saw 0 notices for nil oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 207.65 tonnes for a loss of 95 tonnes over that period.

In silver, the open interest rose by a considerable 524  contracts despite the fact that silver was up by only 5 cents on yesterday. I guess in silver nobody of importance wants to leave the arena.  The total silver OI now rests at 159,826 contracts In ounces, the OI is still represented by .799 billion oz or 114% of annual global silver production (ex Russia ex China).

In silver we had 0 notices served upon for nil oz.

In gold, the total comex gold OI fell to 433,629 for a loss of 164 contracts.  We had 0 notices filed for nil oz today.

We had no changes  in tonnage  at the GLD /   thus the inventory rests tonight at 687.20 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex.   In silver, we had no changes in silver inventory at the SLV  / Inventory rests at 315.152 million oz.

We have a few important stories to bring to your attention today…

1. Today, we had the open interest in silver rise by a considerable 524 contracts up to 159,826 despite the fact that silver was up  by only 5 cents with respect to yesterday’s trading.   The total OI for gold fell by 164 contracts to 433,629 contracts, despite the fact that gold was up $8.60 yesterday.

(report Harvey)

2.Gold trading overnight, Goldcore

(/Mark OByrne)

Asian affairs:


 2 commentaries


8 USA stories/Trading of equities NY

a) Trading today on the NY bourses

b) Fortress

c) JPMorgan results.

9.  Physical stories

1. Dave Kranzler discusses the upcoming paper gold and silver paper scandal

2, Koos Jansen\

3.Keith Barron\\

plus others.

Let us head over to the comex:

The total gold comex open interest fell from 433,793 down 433,629  for a  of loss of 164 contracts despite the fact that gold was up $8.60 with respect to yesterday’s trading.   For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month, and today the latter of these developments continued but a slower pace.  The new active delivery month we enter is October and here the OI fell by 34 contracts down to 1268. We had 1 notice filed yesterday so we lost 33 contracts or 3300 additional oz will not stand for delivery.  The November contract went down by 33 contracts down to 212. The big December contract saw it’s OI fall by 1078 contracts from  296,249 down to 295,171. The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was  140,250 which is poor. The confirmed volume on yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 116,361 contracts. Today we had 0 notices filed for 100 oz. And now for the wild silver comex results. Silver OI rose by a considerable 524 contracts from  159,302 up to 159,826 despite the fact that the price of silver was up  to the tune of only 5 cents yesterday.  Since October is not an active month, we will not see a huge contraction in the OI standing for delivery. The bankers continue to pull their hair out trying to extricate themselves  from their silver mess (the continued high silver OI with it’s extremely low price, combined with the banker’s massive physical shortfall) as the world senses something is brewing in the silver arena. We enter the October contract month which saw it’s OI fall by 29 contracts down to 12. We had 33 contracts filed yesterday so we  gained 4 contracts or an additional 20,000 silver ounces that will stand for metal in this non active month of October. The November contract month saw it’s OI remain constant at 37. The big December contract saw its OI fall by 2045 contracts down to 110,131 The estimated volume today as to number of contracts sold is 39,269 contracts (regular business hours, 8 20 am to 1:30 pm) is good as the bankers through everything but the kitchen sink at silver trying to contain the price below 16.00.  The confirmed volume yesterday (regular plus access market) came in at 43,833 contracts which is excellent in volume. We had 0 notices filed for 165,000 oz.

October contract month:

Initial standings

Oct 13.2015

Gold Ounces Withdrawals from Dealers Inventory in oz   nil Withdrawals from Customer Inventory in oz  nil  32.15  oz  Manfra Deposits to the Dealer Inventory in oz nil Deposits to the Customer Inventory, in oz   nil

  No of oz served (contracts) today 0 contracts

nil oz  No of oz to be served (notices) 1268 contracts

126,800  oz Total monthly oz gold served (contracts) so far this month 190 contracts

(19,000 oz) Total accumulative withdrawals  of gold from the Dealers inventory this month   nil Total accumulative withdrawal of gold from the Customer inventory this month 184,991.8  oz  Today, we had 0 dealer transactions Total dealer withdrawals:  nil oz we had 0 dealer deposits total dealer deposit:  zero We had 1 customer withdrawals:    i out of Manfra: 32.15 oz total customer withdrawal 32.15   oz We had 0 customer deposit:

Total customer deposit: nil   oz

***extremely unusual to have no incoming gold on a continual basis especially with 4.8615 tonnes of gold standing for delivery.

 JPMorgan has a total of 10,777.279 oz or.3352 tonnes in its dealer or registered account. ***JPMorgan now has 580,809.509 oz or 18.06 tonnes in its customer account. . Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.   To calculate the final total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (190) x 100 oz  or 19,000 oz , to which we  add the difference between the open interest for the front month of Oct. (1268 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.   Thus the initial standings for gold for the Oct. contract month: No of notices served so far (190) x 100 oz  or ounces + {OI for the front month 1268)– the number of  notices served upon today (0 x 100 oz which equals 128,700 oz  standing  in this month of Oct (4.000 tonnes of gold. We lost 33 contracts or an additional 3300 oz will not stand for delivery.  It seems that the cash settlements resumed in earnest today. We thus have 4.00 tonnes of gold standing and only 5.3378 tonnes of registered gold (for sale gold/dealer gold) waiting to serve upon those standing.   Total dealer inventory 171,613.368 oz or 5.3378 tonnes Total gold inventory (dealer and customer) =6,671,919.559   or 207.52 tonnes) Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 212.65 tonnes for a loss of 95 tonnes over that period.    the gold comex resumes massive liquidation of total inventory   end And now for silver October silver Initial standings

Oct 13/2015:

Silver Ounces Withdrawals from Dealers Inventory nil Withdrawals from Customer Inventory 99,917.442  oz



Brinks Deposits to the Dealer Inventory nil Deposits to the Customer Inventory nilNo of oz served (contracts) 0 contracts  (nil oz) No of oz to be served (notices) 41 contracts (205,000 oz) Total monthly oz silver served (contracts) 62 contracts (310,000 oz) Total accumulative withdrawal of silver from the Dealers inventory this month nil oz Total accumulative withdrawal  of silver from the Customer inventory this month 7,399,157.2 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had 0 dealer withdrawals: total dealer withdrawal: nil  oz We had 0 customer deposits:

total customer deposits: nil oz

We had 3 customer withdrawals: i) Out of Brinks: 977.500 oz ii) Out of Delaware: 2960.500 oz ii1 Out of Scotia; 95,979.442 oz

total withdrawals from customer:99,917.442    oz

we had 0  adjustments Total dealer inventory: 43.065 million oz Total of all silver inventory (dealer and customer) 162.57 million oz  * The total number of notices filed today for the September contract month is represented by 33 contracts for 165,000 oz. To calculate the number of silver ounces that will stand for delivery in Oct., we take the total number of notices filed for the month so far at (62) x 5,000 oz  = 310,000 oz to which we add the difference between the open interest for the front month of September (41) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing. Thus the initial standings for silver for the Oct. contract month: 62 (notices served so far)x 5000 oz +(41) { OI for front month of September ) -number of notices served upon today (0} x 5000 oz ,=350,000 oz of silver standing for the Oct. contract month. we neither gained nor lost any silver ounces standing in this non active delivery month of October. the comex resumes its liquidation of silver from the customer side.  *** Ladies and Gentlemen: we are having an old fashioned bank run but instead of paper money being removed, it is silver. end   The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China And now the Gold inventory at the GLD: oct 13/no changes in gold inventory at the GLD/rest at  687.20 tonnes Oct 12./2015:  no change in gold inventory at the GLD/rests at 687.20 tonnes Oct 9.2015: no change in gold inventory at the GLD/rests at 687.20 tonnes Oct 8.2015: no change in gold inventory at the GLD/inventory rests at 687.20 tonnes Oct 7/ a withdrawal of 1.78 tonnes at the GLD today/Inventory rests at 687.20 tonnes oct 6/ no change in gold inventory at the GLD/Inventory rests at 688.98 tonnes. OCT 5/ a small withdrawal of .22 tonnes of gold inventory at the GLD/Inventory rests at 688.98 oct 2.2015: another addition of 1.78 tonnes of gold inventory at the GLD/Inventory rests at 689.20 tonnes Oct 1.2015/ a huge addition of 3.28 tonnes of gold inventory at the GLD/Inventory rests at 687.42 tonnes Sept 30./no change in tonnage at the GLD/Inventory rests at 684.14 tonnes Sept 29.2015: no change in tonnage at the GLD/inventory rests at 684.14 tonnes sept 28/another huge addition of 3.87 tonnes of gold into the GLD/Inventory rests tonight at 684.14 tonnes Sept 25/we had a huge addition of 5.66 tonnes into the GLD/Inventory rests at 680.27 tonnes. sept 24.2015; no change in gold inventory/inventory rests at 676.40 tonnes Sept 23.2015: we gained a rather large 1.79 tonnes of gold into the GLD/Inventory rests tonight at 676.40 Oct 13/2015 GLD : 687.20 tonnes* * London is having a tough time sourcing gold. I believe that the last few days of additional GLD gold is a paper gold addition and not real physical. end

And now SLV

oct 13/no change in silver ETF /silver inventory/rests tonight at 315.152 million oz

:oct 12/ no change in the silver ETF/silver inventory rests tonight at 315.152 million oz

Oct 9.2015:/no change in the silver ETF SLV inventory/rests tonight at 315.152 million oz/

Oct 8.2015/no changes in the silver ETF  SLV/Inventory rests tonight at 315.152 million oz

Oct 7/a huge withdrawal of 3.243 million oz from the SLV/Inventory rests tonight at 315.152 million oz

Oct 6/no change in silver inventory/inventory rests at 318.395 million oz

oCT 5/we had a small withdrawal of inventory at the SLV of 134,000 oz/and this is also to pay for fees/inventory rests at 318.395 million oz

Oct 2.2015: no change in silver inventory at the SLV/inventory rests at 318.529 million oz

Oct 1.2015:another addition of 1,145,000 oz of silver inventory added to the SLV inventory./inventory rests at 318.529 million oz

Sept 30/no change in silver inventory at the SLV/Inventory rests at 317.384 million oz

sept 29.2015: we had another withdrawal of 859,000 oz from the SLV/Inventory rests at 317.384 million oz

sept 28./no change in silver inventory/rests tonight at 318.243 million oz/

Sept 25./we had another 954,000 oz of silver withdrawn from the SLV/Inventory rests this weekend at 318.243 million oz

Sept 24.2015: no change in silver inventory tonight/inventory rests at 319.197 million oz

Sept 23.2015: we had a huge withdrawal of 1.718 million oz at the SLV/Inventory rests at 319.197 million oz

oct 13/2015:  tonight inventory rests at 315.152 million oz***  ** the jury is still out if the addition of silver is real or paper silver especially with London in silver backwardation. end   And now for our premiums to NAV for the funds I follow: Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that) 1. Central Fund of Canada: traded at Negative 9.0 percent to NAV usa funds and Negative 8.6% to NAV for Cdn funds!!!!!!! Percentage of fund in gold 62.0% Percentage of fund in silver:37.7% cash .3%( Oct 13.2015). 2. Sprott silver fund (PSLV): Premium to NAV falls to+0.23%!!!! NAV (Oct 13/2015) (silver must be in short supply) 3. Sprott gold fund (PHYS): premium to NAV rises to – .75% to NAV Oct 13/2015) Note: Sprott silver trust back  into positive territory at +0.23% Sprott physical gold trust is back into negative territory at -.75%Central fund of Canada’s is still in jail. Press Release OCT 6.2015 Sprott Increases Offer for Central GoldTrust and Silver Bullion Trust

Offering an Additional Premium of US$0.10 per GTU Unit payable in Sprott Physical Gold Trust Units
and US$0.025 per SBT Unit payable in Sprott Physical Silver Trust Units

When Announced on April 23, 2015, Offers Represented a Premium of US$3.06 per GTU Unit and US$0.91 per SBT Unit for Unitholders Based on Trading Value and the NAV to NAV Exchange Ratio

Premiums as of October 5, 2015 (including the Increased Consideration) are US$1.14 per GTU Unit and US$0.61 per SBT Unit

Notice of Extension and Variation to be Filed Shortly

Offers Will Now Expire on October 30, 2015 –Unitholders Urged to Tender Now

TORONTO, Oct. 6, 2015 (GLOBE NEWSWIRE) — Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U) (together the “Sprott Physical Trusts”), today announced that it has increased the consideration payable to unitholders in connection with its offers to acquire all of the outstanding units of Central GoldTrust (“GTU”) (TSX:GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U) (the “Sprott offers”).

Unitholders will now receive an additional premium of US$0.10 per GTU unit payable in Sprott Physical Gold Trust units and US$0.025 per SBT unit payable in Sprott Physical Silver Trust units (the “Premium Consideration”), in addition to the units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, respectively, being offered on a net asset value (NAV) to NAV exchange basis. Based on trading values and the NAV to NAV Exchange Ratio (as such term is defined in the Sprott offers) at the time Sprott announced its intention to make the Sprott offers on April 23, 2015, the offers reflected a premium of US$3.06 per GTU unit and US$0.91 per SBT unit. The premium as of October 5, 2015, based on trading values, the NAV to NAV Exchange Ratio and the Premium Consideration, represents US$1.14 per GTU unit and US$0.61 per SBT unit, respectively. In connection with this increase in consideration, the expiry time for each Sprott offer is extended to 5:00 p.m. (Toronto time) on October 30, 2015.

“Central GoldTrust and Silver Bullion Trust unitholders have been burdened for too long by a group of trustees committed to protecting the interests of the Spicer family. It is only through the public spotlight that the variety of undisclosed fees paid to supposedly independent trustees has forced public disclosures and hollow justifications. Sprott’s offers to unitholders are compelling and momentum is building as we continue to show the clear advantages of the offers. The response of the GTU and SBT trustees has been to penalize unitholders with the burden of paying for costly lawsuits and expensive advisors to protect the Spicer family and the fees they receive. We are accordingly increasing our offer to compensate unitholders for this abuse of trust, and encourage them to take advantage of this opportunity to exchange their units for an immediate premium, and trade a management committed to entrenchment to one committed to their best interests,” said John Wilson, Chief Executive Officer of Sprott Asset Management.

Added Wilson, “We have provided extensions to the offers so that no unitholders are left without this opportunity to exit an underperforming investment and enter into a high quality security that functions as intended, reflecting the value of the bullion held in the trust. Sprott appreciates the support of GTU and SBT unitholders to date and currently anticipates these extensions will be the final extensions to the Sprott offers.”

As of 5:00 p.m. (Toronto time) on October 5, 2015, there were 8,194,265 GTU units (42.46% of all outstanding GTU units) and 2,055,574 SBT units (37.60% of all outstanding SBT units) tendered into the respective Sprott offers. Total units tendered as of October 5, 2015, do not include pending units which are typically received on the date of expiration.

GTU and SBT unitholders who have questions regarding the Sprott offers, are encouraged to contact Sprott Unitholders’ Service Agent, Kingsdale Shareholder Services, at 1-888-518-6805 (toll free in North America) or at 1-416-867-2272 (outside of North America) or by e-mail at

>end Overnight gold/silver trading from Asia and Europe overnight: courtesy Goldcore/Blog/Mark O’Byrne/Stephen Flood Gold’s “Bigger Question” Is Where To Store It – Marc Faber

By Mark O’ByrneOctober 13, 20151 Comment

Share on facebookShare on twitterShare on linkedinMore Sharing Services

Marc Faber has again encouraged individuals to own physical gold, be wary of possible government confiscation and said that the big question is where to store your gold.

… But I would say an individual should definitely own some physical gold…The bigger question is where should he store it?”

Because I think if we think it through, the failure of monetary policies will not be admitted by the professors that are at central banks.

They will then go and blame someone else for it and then an easy target would be to blame it on people that own physical gold because they can argue, well these are the ones that do take money out of circulation and then the velocity of money goes down …  we have to take it away from them.”

That has happened in 1933 in the US…

With our brilliant governments in Europe that follow US policies and with the ECB talking every day to the Federal Reserve, they would do the same in Europe, take the gold away from people.”

Marc Faber is an eloquent advocate of owning physical gold which he describes as being a way to become “your own central bank.”  He believes an allocation to physical gold will serve as vital financial insurance and that Singapore is the safest place to own gold in the world today.

Watch the complete interview with Marc Faber on

Marc Faber Webinar on Storing Gold in Singapore 

Essential Guide To Storing Gold In Singapore


Today’s Gold Prices:   USD 1154.40, EUR 1014.95 and GBP 757.16 per ounce.
Yesterday’s Gold Prices:  USD 1164.20, EUR 1021.54 and GBP 758.14 per ounce.

Gold in USD – 1 Year

Gold was marginally higher yesterday and finished $5.10 higher, closing at $1162.40. Silver closed at $15.85, up $0.1 for the day.  Euro gold rose to €1023 per ounce, platinum gained $16 to $993 per ounce.

Download Essential Guide To Storing Gold In Singapore


Mark O’Byrne end Gold and silver jump at comex opening after being mauled in Asia/Europe:\ (courtesy zero hedge) Gold & Silver Jump, Rebound From Overnight Asian Dump

As Asia opened last night, gold and silver came under pressure (ahead of China’s biggest Yuan strengthening since November 2014). As US re-awakens from Columbus Day vacation, it appears demand is back (and in heavy volume) for precious metals…


end (courtesy Keith Barron) Keith Barron: Rock bottom

Submitted by cpowell on Mon, 2015-10-12 17:31. Section:

1:30p ET Monday, October 12, 2015

Dear Friend of GATA and Gold:

Geologist and mining entrepreneur Keith Barron, founder of Aurelian Resources and discoverer of the Fruta del Norte gold deposit in Ecuador, has resumed writing occasional commentary after a break of nine years, in part because he finds the current depression in the junior mining industry similar to the depression just prior to the last boom. Barron’s commentary is headlined “Rock Bottom” and it’s posted at his Internet site, “Straight Talk on Mining,” here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


(courtesy Koos Jansen/GATA))

Koos Jansen: China’s gold imports seem stronger over half year

Submitted by cpowell on Mon, 2015-10-12 17:08. Section:

1:08p ET Monday, October 12, 2015

Dear Friend of GATA and Gold:

Gold researcher and GATA consultant Koos Jansen reports today that China’s gold imports appear to have been stronger in the first half of this year than the first half of last year, even as withdrawals from the Shanghai Gold Exchange are starting to seem less correlated to Chinese demand. Jansen’s analysis is headlined “How Much Gold Is China Importing and Does It Still Correlate to SGE Withdrawals?” and it’s posted at Bullion Star here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


(courtesy Craig Hemke/GATA/TF Metals)

TF Metals Report: Cartel banks playing their same old tricks

Submitted by cpowell on Mon, 2015-10-12 16:45. Section:

12:44p ET Monday, October 12, 2015

Dear Friend of GATA and Gold:

Analyzing last week’s Bank Participation Report from the U.S. Commodity Futures Trading Commission, the TF Metal Report’s Turd Ferguson notes that — if one is to believe the data, a dubious proposition — the game remains the same with the monetary metals. That is, the bullion banks sell rallies and cover their shorts on declines. This indicates that they — or the central banks behind them — remain very much in control of the markets. Ferguson’s commentary is headlined “Cartel Banks Playing Their Same Old Tricks” and it’s posted at the TF Metals Report here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


(courtesy Lawrie Williams)

is China close to establishing the yuan/gm gold price?\\

(courtesy Lawrie Williams/GATA)

China may now be close new gold benchmark pricing system

October 13, 2015lawrieongold

Lawrie Williams

Reports out of China suggest that the currently chairmanless Shanghai Gold Exchange (SGE) is on the verge of announcing a new chief executive in Jiao Jinpu, a senior official from the Chinese Central Bank – the Peoples Bank of China. (The SGE is an arm of the PBoC). The likely appointment of Jiao is seen as the definitive indicator that the SGE is now very close to setting up its much-heralded Yuan gold price benchmarking system to rival that in London and give China more control over gold prices in the future. Whether this will still happen this year, though, is rather less certain despite earlier suggestions that it would. Jiao will have to work fast to achieve this, but undoubtedly the groundwork is already well under way.

But the Chinese have also shown that they don’t hang around in implementing key new economically-oriented entities once the go-ahead decision has been taken and, according to a Reuters report Jiao is seen as a mover and shaker who should be able to move things forward rapidly assuming that the benchmark system process would be high on the agenda.

The SGE has been without a Chairman since the previous incumbent, Xu Luode, was promoted to Executive Vice President of the PBoC – which itself is an indicator of the importance of gold in the central bank’s policies. The Chinese view gold as a vital element in the global economic system and in its generally accepted push to position the Yuan as one of the world’s accepted reserve currencies, and while not necessarily to replace the US dollar as top dog yet it probably does have this longer term ambition and with far faster domestic growth still than is being seen in the Western economies. It would seem to be well on its way to achieving this.

But first it will need a ‘seat at the table’ and the initial goal will be to have the Yuan recognised as a constituent of the US-dominated IMF’s Special Drawing Right ‘currency’ – the revised new make-up of which has now been deferred into the second half of next year. In theory this delay has been seen as creating time to give China’s currency a little more time to meet the necessary criteria to be part of the SDR system, but in practice perhaps another delaying tactic by the US which recognises the potential threat to its global economic dominance.

China does see gold as providing a significant part of the global economic system and would thus like to have a much bigger influence in its pricing. Chinese banks are beginning to be admitted into the new London benchmarking system introduced earlier this year, but probably at a slower rate than the Chinese would like. Even with the Chinese bank participation it is suspicious of the London price setting mechanism as being potentially under the control of the Western bullion banks which it sees as working on behalf of their respective national central banks. A Yuan gold ‘fix’ in Shanghai is reckoned to be a way of influencing the global gold price (probably equally geared towards the interests of the PBoC, although this will be denied.) There are no level playing fields in global economics, and gold is almost certainly no exception in this.

In its article Reuters quoted a reliable Chinese source as commenting: “The exchange [SGE]will continue with the internationalisation of the Chinese gold market. That should not change because it is not just the ex-chairman’s policy but also state policy”. The last sentence perhaps says it all!


this is huge!!!

Dave Kranzler on the brewing scandal in paper gold and silver.  Yesterday it was reported that Mitsui is getting out of the precious metals business.  They are a huge trading company. Why are they leaving?

also unbeknownst to me, Dupont and Ferro corp left the silver users club.  They know something is brewing and had to leave as a member lest they will be charged with collusion.


(courtesy Dave Kranzler/IRD)

Is A Scandal In Paper Gold/Silver Brewing?

October 13, 2015Financial Markets, Gold, Market Manipulation, Precious MetalsComex, LBMA, silver eagles, silver shortage, Silver Users Association

We should realize the suppression of the silver price is overwhelmingly a monetary problem rather than an industrial users collusion. Money creators don’t want silver as a competitor to their wealth transferring synthetic currency. So if the SUA (sounds like a hog call) went away completely and the monetary drive to hinder silver remained, we’ve made perhaps ten percent of the necessary progress. But it seems as if the SUA, better connected in its market intelligence than any silver longs, is in position to know what the megabank and central bank price suppressors know well in advance of any silver long price analysts. – Charles Savoie, link below

Yesterday it was not widely reported that Mitsui Group’s Precious Metals Division was pulling out of the London and New York paper gold markets. Curiously, the Company will continue its precious metals operations in Tokyo and Hong Kong.

I had suggested that this was another “signpost” of the world’s growing distrust of the massive paper leverage embedded in the Comex and the LBMA.

A good friend and business colleague emailed me a response to my post yesterday. He is a scrap gold/silver recycler and gemologist. He and I worked on Wall Street together:

This is even bigger than you’re making it out to be. And I do NOT mean that snidely: combined with the Barclays and Deutsche moves, it signals that the financial center of the world is also shifting east. Not just precious metals. Pretty big statement by each of these banks, and big banks [especially Japanese big banks] don’t make moves like this without careful consideration.

I agree with Brian that this is a big statement move, especially by one of the biggest corporations in the world from a country that typically a U.S. vassal.

However, even more interestingly was the comment posted by Charles Savoie on my blog. For those of you who are relatively new (i.e. since 2008) to the precious metals world, Mr. Savoie has been around a long time and used to work with David Morgan. In other words, he has impeccable silver market “pedigree.” Mr. Savoie engages in “slavish” silver market research and left this comment:

The two largest members, Du Pont and Dow Chemical, members since before 1950—pulled out as of early last summer. Tiffany & Company and Ferro Corporation also withdrew. The Mitsui interests have usually also been listed. Someone is attempting to sidestep a scandal. Forgive and forget that they were members? Not in my perspective they remain culpable of collusive price suppression for several generations.

Mr. Savoie presented his cash in an article published and uploaded on the SGTReport in July: The Silver Association Is Shrinking

Something has definitely been occurring out of sight of auditors and all other forms of accountability. I fear that many of the widely read commentators who present analysis that is 100% reliant on the validity of what is being reported by LBMA and Comex banks are missing a much bigger event unfolding. In fact, I believe that the true availability of deliverable physical gold/silver is considerably less than what is being reported by the western bullion banks (and the Fed, ECB, BoE). If I’m right about this, then most of the recent commentary/analysis that has been published is highly misleading.

The elitists always drop small hints to warn us about impending disasters. Warren Buffet warned about 9 years ago that the U.S. was in danger of becoming a nation of serfs. Right now over 50% of the country is dependent on some form of Government transfer payment and nearly 1 in 6 people receive food stamps…I would suggest hat the recent withdrawal of highly prominent banks from the London and NY paper bullion markets is another “hint” of a brewing catastrophe.

On the Comex the paper to deliverable gold ratio has spiked up to the horrifying ratio of 200:1. We can only guess at the true paper to physical ratio of gold in London. Of course, that 200:1 ratio is a guess as well unless you are naive enough to believe the bank-issued Comex inventory reports.

Yes, indeed, a scandal is brewing. And it looks like several rats are folding their hands and running for the exits…



And now your overnight Tuesday morning trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan rises a bit in value, this  time at  6.3415Shanghai bourse: down .17%, hang sang: red 

2 Nikkei closed  down 203.93 points or 1.1%

3. Europe stocks all  in the red    /USA dollar index up to 94.91/Euro up to 1.1360

3b Japan 10 year bond yield: falls slightly to .315% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.26

3c Nikkei now just above 18,000

3d USA/Yen rate now above the important 120 barrier this morning

3e WTI: 47.64  and Brent:   50.12

3f Gold up  /Yen up

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil up for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to .572 per cent. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate rises to 10,01%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield rises to  : 7.88%  

3k Gold at $116650 /silver $15.95 (10 am est)

3l USA vs Russian rouble; (Russian rouble down 37/100 in  roubles/dollar) 62.38

3m oil into the 47 dollar handle for WTI and 50 handle for Brent/ China purchases huge supplies from Saudi Arabia

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9611 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0918 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p Britain’s serious fraud squad investigating the Bank of England on criminal charges/

3r the 5 year German bund now  in negative territory with the 10 year moving closer negativity to +.572%/German 5 year rate negative%!!!

3s The ELA lowers to  87.9 billion euros, a reduction of 1.0 billion euros for Greece.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.07% early this morning. Thirty year rate below 3% at 2.90% / yield curve flatten/foreshadowing recession.

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Futures Slump After China Imports Plunge, German Sentiment Crashes, UK Enters Deflation

For the past two weeks, the thinking probably went that if only the biggest short squeeze in history and the most “whiplashy” move since 2009 sends stocks high enough, the global economy will forget it is grinding toward recession with each passing day (and that the Fed are just looking for a 2-handle on the S&P and a 1-handle on the VIX before resuming with the rate hike rhetoric). Unfortunately, that’s not how it worked out, and overnight we got abysmal economic data first from China, whose imports imploded, then the UK, which posted its first deflation CPI print since April, and finally from Germany, where the ZEW expectation surve tumbled from 12.1 to barely positive, printing at just 1.9 far below the 6.5 expected.

As we reported overnight, while Chinese exports declined a better than expected 1.1% in September, ostensibly to validate the government’s decision to devalue the Yuan, it was the crash in imports, which plunged by 17.7% (and down a whopping 20.4% in dollar terms, 50% worse than August), falling or 10 consecutive months, or the longest negative streak in 6 years, that has spooked markets, and ended any temporary goodwill China’s economy may have had when it closed its market for a week at the end of September, which in turn pushed the country out of the market’s subconsciousness, and precipitated the start of the torrid rally in global stocks. As it turned out, nothing had changed, and in fact the Chinese economy was getting even worse.

The commentary was uniformly negative, via BBG:

Nie Wen, Shanghai-based economist at Huabao Trust:

  • Many Chinese manufacturers purchase raw material and re-process them before selling them overseas, so low imports growth may mean weak export outlook as well
  • Sept. imports data show manufacturing sectors continue to deteriorate while industrial demand is weak, which puts 3Q GDP at risk to fall below 7%

Xu Gao, Beijing-based chief economist at Everbright Securities:

  • Sept. imports data reflects weak domestic demand
  • Local stock market uncertainties may also lower the confidence in private sectors
  • Exports sectors are unlikely to boost growth in China now when global demand hasn’t recovered as earlier expected
  • Sees 3Q GDP growth at 6.8% vs 7.0% in 2Q

The confirmation that China’s slump is going nowhere fast, in turn ended the recent rally in EM currencies, and saw both the benchmark EM FX, the Ringit and Rypiah sliding, however it was the confirmation that China’s woes are spreading to Germany, where the Volkswagen scandal is also ravaging the domestic economy, not to mention the refugee crisis, that sent the German ZEW index of expectations plunging from 12.1 to just 1.9.

But while any other country would use this latest slide in the economy (German government GDP forecasts were also cut from 1.8% to 1.7% overnight) to demand even more money printing, the stern Teutonic mentality would not all this and as German Finance Minister Wolfgang Schaeuble said on Tuesday he was not happy about the low interest rate environment, which he said made life difficult, especially regarding pension provisions. “I’m unhappy about the low interest rate,” he said at an engineering conference in Berlin.

“It’s difficult if a normalization of monetary policy is a big risk,” German Finance Minister Wolfgang Schaeuble says. “That almost leads to the conclusion that we’re in a situation like a drug addict.”

It only took you 7 years to figure this out?

And then the cherry on top came from the UK, a country whose Goldman banker-controlled central bank was recently making very loud noises about hiking rates, to announce it just had its first negative CPI print since April as the global exporting of deflation by China and Japan and all of NIRPy Europe of course goes into second gear.


Looking at the market, Asian stocks traded lower following weakness across the commodities complex and discouraging Chinese trade data. Nikkei 225 (-1.1%) and ASX 200 (-1.11%) were led lower by energy names following the around-4% decline in WTI, while mixed Chinese trade figures added to the subdued tone as a narrower than expected decline in exports and the largest trade surplus on record, were offset by a collapse in imports. This saw indecisive trade the in the Shanghai Comp. (+0.2%) where weakness can also be attributed to profit taking following yesterday’s firm gains. Finally, JGBs traded higher as the weakness in Asian bourses
supported fixed income, while the BoJ also entered the market to buy JPY 470 bn of government bonds.

The release of yet another disappointing macroeconomic data out of China, this time in the form of trade balance which showed that China’s imports slid for the 11th straight month, prompted flows away from riskier assets and instead supported Bunds. At the same time, worse than expected ZEW survey expectations (1.9 vs. Exp. 6.5), with economists noting that Volkswagen scandal has dampened the outlook for the German economy, further buoyed flight to quality trade.

Financials underperformed on the sector breakdown, with UBS (-1.30%) and Credit Suisse (-1.40%) shares coming under selling pressure in reaction to source reports suggesting that Switzerland is to put 5% leverage ratio on large Swiss banks. On the other hand, SABMiller shares surged after it was reported pre-market that the key terms of a possible deal with AB InBev have been agreed upon.

In commodities, WTI crude futures remained near yesterday’s lows where it fell around 4% after OPEC downgraded its demand forecast and several large banks remained bearish on prices. Additionally, in what has become a schizophrenic tradition, the IEA’s monthly oil report predicted that the oil surplus in 2016 will persist as demand growth slows, while the Ex-IEA chiuef Tanaka said that oil will price below $100 until at least 2020, contradicting what OPEC said just a day earlier, and ending any hopes for a continuation of the oil rally.

Gold prices retreated from near 3-month highs overnight amid profit taking alongside widespread weakness across the commodities complex. Elsewhere, copper and iron ore prices were also pressured following weak trade figures from China which showed imports slumped about 20%.

In FX, despite benefiting from the aforementioned M&A related flow, GBP’s strength gradually waned and GBP/USD printed fresh session low following the release of softer than expected UK inflation data (CPI Y/Y -0.10% vs. Exp. 0.00%), which according to the ONS was pushed lower by clothing, fuel and gas.

Elsewhere, disappointing trade balance data from China weighed on commodity sensitive currencies, with the likes of CAD, AUD and NZD all weaker heading into the North American crossover. Of note, the BoJ released their minutes overnight, however failed to provide any new insights.

Overnight, Fed’s Lockhard (Voter, Neutral) reiterated that interest rates will be lifted in 2015, while going forward, market participants will get to digest the release of the latest US Fed discount rate minutes, comments from Fed’s Bullard and Dudley.

There is nothing on the economic calendar today, while on the earnings front we get JNJ – which just announced a $10 billion buyback – reporting premarket, while Intel reports after the bell, as does, surprisingly, JPM in a change from its usual reporting time first thing in the morning.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Flight to quality trade dominated the price action in Europe, following disappointing Chinese trade balance release and also worse than expected German ZEW survey
  • Despite benefiting from the aforementioned M&A related flow, GBP’s strength gradually waned and GBP/USD printed fresh session low following the release of softer than expected inflation data, which according to the ONS was pushed lower by clothing, fuel and gas
  • Going forward, market participants will get to digest the release of the latest US Fed discount rate minutes, comments from Fed’s Bullard and Dudley, as well as earnings by J&J, JP Morgan and Intel
  • Treasuries rally overnight after China’s import data missed estimates, sending world equity markets lower; U.S. economic data releases this week include CPI, PPI and retail sales.
  • Switzerland’s finance ministry will require the country’s biggest banks to have capital equal to about 5% of total assets after UBS Group AG and Credit Suisse Group AG sought to win easier terms, according to people briefed on the deliberations
  • Britain’s inflation rate turned negative for only the second time since 1960 in September, reflecting a weak price backdrop that the Bank of England has warned will persist into 2016
  • Anheuser-Busch InBev NV agreed to buy SABMiller Plc for almost 69 billion pounds ($106 billion) to clinch a record industry deal after several rejections, creating a brewer that will account for a third of all beer sales globally
  • The $12.9 trillion U.S. government bond market — long considered the deepest and most liquid in the world — is now plagued by more bouts of turbulence than at any time since at least the 1970s
  • Global oil markets will remain oversupplied next year as demand growth slows and Iranian exports are poised to recover with the lifting of sanctions, the IEA said
  • Since mid-August, investors have poured a record $4.5 billion into the Next Funds Nikkei 225 Leveraged Index ETF, a security designed to rise or fall twice as fast as its namesake equity gauge; the Nikkei 225 Stock Average’s loss over that period comes out to ~21%
  • $26.55b IG priced last week, $400m high yield. BofAML Corporate Master Index OAS narrows 1bp to +173, YTD low 129. High Yield Master II OAS narrows 13bp to +613, YTD low 438
  • Sovereign 10Y bond yields slightly lower. Asian and European stocks fall, U.S. equity-index futures decline. Crude oil, copper and gold drop


DB’s Jim Reid completes the overnight event summary

It’s straight to China this morning where the latest September trade data is out and it’s made for fairly mixed reading. Bettering expectations, exports were down -1.1% mom in Yuan terms last month, following consensus estimates for a drop of -7.4% and which comes on the back of declines of -6.1% and -8.9% in the two months previously. Imports, however, have slowed considerably (-17.7% mom vs. -16.5% expected), the steepest drop since May. That’s seen China’s trade surplus increase to Rmb378bn (vs. Rmb292bn expected), from Rmb368bn in August. In USD terms it’s largely the same story, with exports (-3.7% mom vs. -6.0%) down but ahead of expectations, and imports (-20.4% mom vs. -16.0% expected) falling sharply and more than expected.

Chinese equity markets are down post the data, although they have generally chopped around this morning. The Shanghai Comp (-0.30%) and CSI 300 (-0.38%) are lower, taking most Asian bourses with them. Japanese markets are on the back foot after returning from yesterday’s public holiday with the Nikkei -1.06%, while the Hang Seng (-0.49%), Kospi (-0.36%) and ASX (-0.55%) are also lower. Oil markets fell sharply following the data, but are still up nearly a percent this morning after sharp falls yesterday (see below). The Aussie Dollar has dropped half a percent, while EM currencies are generally half to a percent lower across the board in Asia this morning.

With Japan on holidays yesterday and the US Treasury market shut for Columbus Day, it was unsurprisingly pretty quiet in markets. Much of the price action in equities was relatively benign. Despite a strong showing in Asia, European equities ran out of steam and closed down a tad with the Stoxx 600 (-0.28%) bringing to an end its run of six consecutive sessions of gains. The S&P 500 (+0.13%) did nudge into positive territory in the last hour of trading, with volumes some 30% lower than the three-month average and with investors no doubt also staying on the sidelines somewhat ahead of earnings releases this week.

The Dow (+0.28%) also closed higher and has now finished in positive territory for the last seven sessions, while the VIX extended its move lower, down another 5% yesterday. The tech space was also in focus following the news of Dell’s agreed takeover of EMC Corp in the largest deal ($67bn) in the sector in history and one which is set to come with a decent slug of debt financing alongside.

US equities managed to shrug off what was a steep leg lower in the Oil complex yesterday following some production numbers out of OPEC. WTI (-5.10%) and Brent (-5.30%) both fell back below $50/bbl after OPEC’s monthly report showed that the cartel produced 31.57m barrels a day in September, the most since April 2012 and up over 100k barrels a day from August. Despite the numbers, OPEC did however revise lower its forecasts for production out of non-OPEC countries this year and next, consistent with the recent EIA report. A comment from OPEC said that the anticipated fall in excess supply in the market should result ‘in more balanced oil market fundamentals’.

In the absence of the US bond market, European yields were largely lower across the board yesterday, 10y Bunds in particular down nearly 4bps to 0.576%. Yields in Italy and Spain were down a couple of basis of points too, however it was a different story in Portugal where both bonds (10y yield +4.1bps) and equities (PSI -2.97%) were notable underperformers relative to the rest of Europe. That appears to be as a result of the news that Portugal’s opposition Socialists Party (PS) are exploring the possibility of joining forces with the radical Left Bloc and hardline Communist Party (PCP) in forming a government following the recent inconclusive election earlier this month (according to the FT). The Socialist Leader, Costa, confirmed the contact with both the Left Bloc and PCP, as did the leader of the Left Bloc who was quoted in Reuters as saying that ‘conditions have been created for a basis consensus on the Left Bloc’s terms for allowing the creation of a government’. While a scenario where by the political scene switches from a centre-right coalition to a more anti-austerity focused Government is by no means certain, it’s a situation worth keeping a close eye on.

Yesterday’s Fedspeak saw both Lockhart and Evans speaking again, largely reiterating their comments from Friday. Lockhart emphasised that October is ‘live’ and that he is comforted by the reduction in volatility in markets recently. However a large part of this is due to the Fed being priced out of the market until next Spring so the argument is a bit circular. Evans confirmed his view that in his mind liftoff in mid-2016 is more appropriate, while Fed Governor Brainard added to this more dovish stance and highlighted the clear uncertainty at present, saying that ‘I view the risks to the economic outlook as tilted to the downside’ and that ‘the downside risks make a strong case for continuing to carefully nurture the US recovery and argue against prematurely taking away the support that has been so critical to its vitality’. The view of the Fed delaying was shared by China’s Finance Minister Lou yesterday, quoted in the Chinese press as saying that the Fed ‘isn’t at the point of raising rates yet and under its global responsibilities it can’t raise rates’.

Looking ahead to what’s a busier calendar today, we’re kicking off this morning in Germany with the final September CPI print. Shortly following this we’ve got more inflation data, this time out of the UK with the September CPI print while RPI and PPI readings will also be due along with the BoE credit conditions and bank liabilities survey. Elsewhere, the October German ZEW survey will also be closely watched. Over in the US the NFIB small business optimism reading for September is the only notable release, while the only Fedspeak due is Bullard, due to speak at 1pm BST. As mentioned, one eye will be on the US earnings too with the highlights being Johnson & Johnson, JP Morgan and Intel.

end ASIAN AFFAIRS Monday night 9:30 pm est/Tuesday morning 930 am Shanghai time (courtesy zero hedge) AsiaPacStocks Tumble After Chinese Trade Data Signals Growing Global Growth Scare

After an initial knee-jerk reaction (perhaps on better-than-expected exports – signalling perhaps the devaluation ‘worked), AsiaPac stocks are tumbling rapidly as the 11th monthly decline in imports (down a stunning 17.7% YoY in Yuan terms) signaling significant domestic weakness (and thus a larger drag on global growth).

As Bloomberg reports,

China’s imports extended the longest losing streak in six years, underscoring the headwinds to global growth from a rebalancing in the world’s second-largest economy and declining commodity prices.


Imports plunged 17.7 percent in yuan terms in September, widening from a 14.3 percent decrease in August and an 11th straight decline. Overseas shipments fell 1.1 percent in September in yuan terms, the customs administration said Tuesday, compared with a 6.1 percent drop in August. The trade surplus was 376.2 billion yuan ($59.4 billion).



The import slide reflects the pressure China’s economic slowdown is having on global growth and this year’s plunge in commodity prices. On the export side, signs of stabilization suggest improved external demand and offers the first indication that the People’s Bank of China’s surprise devaluation of the yuan in August is giving a boost to competitiveness.


“Import growth remained sluggish, suggesting weakening domestic demand, particularly investment demand,”said Yang Zhao, China economist at Nomura Holdings Inc. in Hong Kong. “We maintain our view that GDP growth will decline to 6.7 percent in the third quarter.”

Of course, policymakers are out with more promises…

  • *DJ China Customs Spokesman: Weaker Yuan to Help Boost Exports

Which we are sill sound an awful lot like currency manipulation to The US Congress.


This is interesting:  a private telecom supply company announced last week that it was going public. Then last night, much to the astonishment of investors, they announced their bankruptcy\

(courtesy zero hedge)

Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier

When two weeks ago we reported what may have been the biggest layoff announcement in China’s current economic turmoil, after the second largest coal company Longmay Group announced it would lay off 100,000 – or about 40% of its entire workforce – while dramatic, the news did not shock too many. After all, China’s commodity fiasco (as a reminder, as we first reported, at current commodity prices more than half of Chinese companies do not generate enough cash flow to even cover their interest expense) is known to most and as such rationalization of this kind are only just starting: it is not exactly clear how China will deal with millions of suddenly unemployed workers, but it will only cross that bridge when it comes to it.

Far more disturbing was today’s news from China’s prosperous, and far more high-tech, city of Shenzhen, and specifically major telecom supplier Fu Chang Electronic Technology Co. (also known as Fosunny), which supplies parts to domestic telecommunication giants such as Huawei Technologies Co and ZTE Corp. as well as international telecom companies like Vodafone and AT&T.

The company made headlines last week after reports that it had told clients it was planning to list on the stock exchange. The news couldn’t have been more wrong because on Thursday, instead of going public, the company announced it would be going dark, when it issued a statement saying it was ceasing operations due to liquidity problems resulting from legal and debt issues.

Even more surprising is that Fu Chang wouldn’t be the first – Fosunny is the third supplier of plastic parts to the telecom industry to go bankrupt in the past month, the Global Times said.

The immediate outcome of the announcement, according to IBtimes, was that thousands of factory workers and suppliers staged protests outside the company’s Shenzhen office, where China Business News showed pictures of a line of police in helmets confronting a group of protesters.

The Global Times says that protests started after the Thursday announcement and continued through the weekend, with thousands of people gathered outside the company in the Longgang District of Shenzhen, demanding compensation, according to Chen Li, whose company supplied packaging materials for Fu Chang.  Chen told the Global Times on Sunday that the impact on his company may be severe.

“It might even lead to liquidity problems for our company and we might end up going out of business,” he said, adding that Fu Chang owes his company 2.51 million yuan ($395,600).

Fu Chang owes banks 190 million yuan in debt and suppliers 270 million yuan, and it is two months behind on pay for its employees, the National Business Daily reported on Friday. The newspaper also said the shutdown would affect more than 3,800 employees and more than 300 suppliers. 

In a troubling sign for China’s supposedly thriving telecom sector, Global Times cited experts as saying such firms “have seen their profit margins squeezed by rising labor costs in southern China, and a slowdown in both international and domestic demand. China’s smartphone sales contracted in the first half of this year, for the first time since 2009, while the country’s overall exports fell more than 8 percent in August, and more than 4 percent in September, compared to last year.”

Labor experts told International Business Times recently that factory workers’ wages have risen in southern Guangdong province in particular, not least because the new generation of better-educated rural migrant workers — the mainstay of China’s labor force over recent decades — is less willing to do mindless production line work. As a result, Guangdong has seen some of its lower value-added companies close, and others move out to cheaper parts of Southeast Asia or inland parts of China.

It is troubling (not so much for the business cycle which demands it but for China’s increasing lack of centralized control) that what was once taboo, namely Chinese corporations defaulting, has now become a practically daily occurrence.

It is even more troubling that China’s cash flow weakness appears to have spread far more rapidly and broadly than even we anticipated, and is impacting industries which most had though would be immune from a hardish landing, if only in the beginning.

But where it is most troubling, is that what recently became the largest market for Apple’s iPhones suddenly appears to be stuttering. And while the Fed can pretend all it wants that there are no substantial and direct connections between China and the US (just don’t tell that to Bravo TV’s Millon Dollar Listing which while thoroughly fake would absolutely not exist without Chinese buyers), if and when the world’s largest company by market cap admits just how bad the Chinese reality is, not even the US government secretly buying up all of AAPL’s excess inventory (remember: Apple is the NSA’s best friend) will save the gargantuan gadget maker which simply can not exist in a world where the marginal consumer, whether in Boston or Beijing, has tapped out.

end RUSSIAN AND MIDDLE EASTERN AFFAIRS Insurgents call for jihad against the Russians.  They shell the Russian embassy in Damascus (courtesy zero hedge) “Insurgents” Shell Russian Embassy In Syria After Al-Qaeda Calls For Jihad Against Russian Civilians

As the twin blasts that ripped through Ankara on Saturday underscore, being around large gatherings of people who are protesting (peacefully or otherwise) in public places can be dangerous if you’re in a Mid-East war zone. Large crowds make for easy targets and as we’ve seen in Turkey, at least some governments seem to believe that inflicting casualties on civilians is a legitimate tool for shaping public opinion.

With that in mind, consider that on Tuesday, “insurgents” hit the Russian embassy in Damascus as more than 300 people gathered to express their support for Moscow’s intervention in Syria. As AFP reports:

Two rockets struck the Russian embassy compound in Damascus on Tuesday sparking panic as several hundred people gathered to express their support for Moscow’s air war in Syria, AFP journalists said.


Some 300 people had begun to gather for a demonstration backing Russia’s recent intervention in Syria when the rockets crashed into the embassy compound in the Mazraa neighbourhood of the capital, the journalists at the scene said.



There was widespread panic among the demonstrators, who moments earlier had been waving Russian flags and holding up large photographs of Russian President Vladimir Putin.

Here’s a bit of amusing color from ABC:

Some held placards that read: “Thanks Russia” and “Syria and Russia are together to fight terrorism.”


“President Putin’s stances were absolutely positive for Syria,” said 39-year-old civil servant Nizar Maqssoud.


Student Osama Salal, 18, said: “All the West stood against us. Only Russia backed us . we are all here to thank Russia and President Putin.”

Interfax says no one was killed or wounded. And here’s Lavrov: “This is… most likely intended to intimidate supporters of the fight against terror and prevent them from prevailing in the struggle against extremists.”

Meanwhile, the head of al-Nusra, Abu Mohamed al-Jolani, is out raising the spectre of the Soviet-Afghan war on the way to calling for a jihad against Russian civilians. We go back to AFP:

“If the Russian army kills the people of Syria, then kill their people. And if they kill our soldiers, then kill their soldiers. An eye for an eye,” Abu Mohamed al-Jolani, the head of Al-Nusra Front, said in an audio recording released late Monday.


He pledged that Moscow’s air war in Syria, which began on September 30, would have dire consequences for Russia.


“The war in Syria will make the Russians forget the horrors that they found in Afghanistan,” Jolani said, adding: “They will be shattered, with God’s permission, on Syria’s doorstep.”


“Delay the disputes until the demise and smashing of the Western Crusader and Russian campaign on Syrian land,” he said.


“I call on all armed factions to gather the highest number of shells and rockets and to hurl hundreds of rockets every day at the Nusayri villages, just like the scoundrels do to the Sunni villages and towns, to make you taste what our people are suffering,” Jolani said.


Nusayri is a derogatory term for Alawites, considered by Al-Nusra’s extreme interpretation of Islam to be apostates.


“When they will stop attacking our village and cities, we will stop attacking theirs,” he added.

At the risk of overthinking things, both the “incident” in Damascus and the jihad call come at a rather convenient time for the West and its various regional, Sunni allies. President Obama has insisted that Russia will get itself into a “quagmire” in Syria only so far, the gains secured on the ground by Hezbollah and other troops loyal to Iran (with Russian air support) seem to suggest that this may end up being a rather quick victory.

Given that, it’s interesting that a Sunni extremist group which has received support from Assad’s Mid-East enemies should come out and describe the very same quagmire that Obama suggested would unfold. Additionally, lobbing rockets at civilians who are staging a pro-Russia rally might well be construed as a helpful tool in perpetuating the idea that Moscow’s involvement will make things worse for Syrians, another line parroted ceaselessly in the West.

Then again, the suggestion that Russian civilians will be targeted in retailiation for any civilians killed in Syria will only serve to support Putin’s “we must attack them before they come to our homes” pronouncement and thus isn’t likely to dissuade The Kremlin.

One should expect that the anti-Russian pronouncements from the various Sunni extremist groups fighting for control of the country will only increase in the coming days and weeks, and on that note, we suggest you first recall the following line from a leaked diplomatic cable ca. 2006describing the preferred strategy for destabilizing the Assad regime…

— PLAY ON SUNNI FEARS OF IRANIAN INFLUENCE:  There are fears in Syria that the Iranians are active in both Shia proselytizing and conversion of, mostly poor, Sunnis.  Though often exaggerated, such fears reflect an element of the Sunni community in Syria that is increasingly upset by and focused on the spread of Iranian influence in their country through activities ranging from mosque construction to business. Both the local Egyptian and Saudi missions here, (as well as prominent Syrian Sunni religious leaders), are giving increasing attention to the matter and we should coordinate more closely with their governments on ways to better publicize and focus regional attention on the issue. 

…and then consider the following from AP, describing more of Jolani’s jihad call…

The jihadi leader promised to pay 3 million euros ($3.42 million) to whomever kills Assad and 2 million euros ($2.28 million) to whomever kills Hezbollah leader Sheikh Hassan Nasrallah, whose men are fighting along with Assad’s forces.


Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/Tuesday morning

Euro/USA 1.13600 up .0009

USA/JAPAN YEN 119.87 DOWN .168

GBP/USA 1.5226 down .0109

USA/CAN 1.3008 up .0037

Early this Monday morning in Europe, the Euro rose by 9 basis points, trading now just above the 1.13 level rising to 1.1360; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, and the Ukraine,along with rising peripheral bond yields, and the failure in ramping of the USA/yen cross above the 120 yen/dollar mark , causing most bourses to fall.  Last night the Chinese yuan rose in value.  The USA/CNY rate at closing last night:  6.3415 up .0205  (yuan lower)

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen now trades in a slight northbound trajectory  as settled slightly up again in Japan  by 17 basis points and trading now just below the all important  120 level to 119.87 yen to the dollar.(and thus the necessary ramp for all bourses failed in propelling bourses)

The pound was down this morning by 109 basis points as it now trades well above the 1.52 level at 1.5226.

The Canadian dollar is now trading down,  37 basis points to 1.3008 to the dollar. (Harper called an election for Oct 19)


We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially  with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).(blew up)

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this Tuesday morning: closed down 203.93  or 1.1% 

Trading from Europe and Asia:
1. Europe stocks all in the red

2/ Asian bourses mostly in the red   … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai slighty in the green (massive bubble ready to burst), Australia in the red: /Nikkei (Japan)red/India’s Sensex in the red/

Gold very early morning trading: $1165.50


Early Tuesday morning USA 10 year bond yield: 2.07% !!! down 2 in basis points from Monday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield falls to  2.90 down 2 in basis points.

USA dollar index early Tuesday morning: 94.93 up 4 cents from Monday’s close. (Resistance will be at a DXY of 100)

end This ends the early morning numbers, Tuesday morning   And now for your closing numbers for Tuesday night: 2 pm  Closing Portuguese 10 year bond yield: 2.41%down 3 in basis points from Monday Japanese 10 year bond yield: .315% !! down slightly from Monday but still extremely low Your closing Spanish 10 year government bond, Tuesday down 1 in basis points.  Spanish 10 year bond yield: 1.80% !!!!!! Your Tuesday closing Italian 10 year bond yield: 1.66% down 2  in basis points from day: Tuesday/ trading 14 basis point lower than Spain. IMPORTANT CURRENCY CLOSES FOR TUESDAY Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond:  2:00 pm  Euro/USA: 1.1378 up .0027 (Euro up 27 basis points) USA/Japan: 119.74 down 0.305 (Yen up 31 basis points) Great Britain/USA: 1.5246 down .0088(Pound down 88 basis points USA/Canada: 1.3034 up .0024 (Canadian dollar down 24 basis points)

USA/Chinese Yuan:  6.341 5 up .0205  (Chinese yuan down)

This afternoon, the Euro rose by 27 basis points to trade at 1.1378. The Yen rose slightly to 119.74 for a gain of 31 basis points. The pound was down 88 basis points, trading at 1.5246. The Canadian dollar fell 24 basis points to 1.3034. The USA/Yuan closed at 6.3415 Your closing 10 yr USA bond yield: down 1 in basis points from Monday at 2.04%// ( trading below the resistance level of 2.27-2.32%). USA 30 yr bond yield: 2.88 down 4 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries The low yields means that the bond market is not buying the rallies on bourses.  Your closing USA dollar index: 94.79 down 8 cents on the day .   European and Dow Jones stock index closes: London:  down 28.90 points or 0.45% German Dax:  down 87.01 points or .86% Paris Cac down 43.32 points or 0.9 Spain IBEX: down 131.10 points or 1.28 % Italian MIB: down 42.78,points or 0.19% The  Dow: down 49.97 or 0.29% The Nasdaq:  down 42.03  or 0.87% WTI Oil price;   46.53 Brent OIl:  49.16 USA dollar vs russian rouble dollar index:  63.05  down 1 rouble per dollar This ends the stock indices, oil price, currency crosses and interest rate closes for today. And now for USA stories:

First the NYSE performance today:

Biotechs Bruised & Trannies Trounced As VIX ‘Losing’ Streak Comes To An End

Today’s market analogy… (hint – gets exciting at around 40 seconds)


We dumped (on China data, major CNH weakness into China close, and European data), we pumped (because markets opened in ‘Murica) and we dumped again (when Europe closed and overnight high stops were tagged) on absolutely no news whatsoever…


Ugly day for Trannies, dumped into the close…


Just as we warned…WTF was going on yesterday?


From Friday, The Dow was sustained green for as long as possible as Trannies got trounced…


VIX’s 10-day “losing” streak has come to an end…


VIX is catching ‘up’ to stocks…


As it appears VXX found support having re-filled the Black Monday gap…


Biotechs were battered and broke a key support trendline… (prepare for the Hillary-bashing)


Ahead of the big banks’ earnings, credit markets remain notably more concerned…


Stocks seemed to track Crude perfectly – giving up on USDJPY and bonds After Europe Closed…


With the re-opening of the bond market, buyers returned (as it appears Dell/EMC rate locks have been completed)…


The USDollar trod water for the second day against the majors (despite major AUD weakness)…


But soared 0.4% against Asian FX – its biggest gain in 7 weeks…


Gold and silver gained on the day, jumping at the US open after weakness overnight, while crude and copper slid…


Crude dumped on China trade data then bounced at the US open on algo-idiocy, before fading back… biggest 2-day loss in 2 months…


Gold & Silver dropped on China Trade then ripped after the 8amET witching hour…


Charts: Bloomberg

Bonus Chart: Rate-hikes are disappearing over the horizon again…


Bonus Bonus Chart: What’s Next? (h/t @StockCats )


what on earth is going on here!!!

these guys are huge !

(courtesy zero hedge)

Fortress Group Halted After Bouncing Back From Overnight Tumble

Following last night’s ‘reports’ that Fortress Investment Grouop will shutter its once colossal macro hedge fund (and Mike Novogratz will leave), FIG shares bounced back into the green after tumbling 10% overnight. However, FIG shares have just been halted, news pending…


We presume this is the “news” that confirms the reports…





JPMORGAN  after the bell misses across the board on disappointing results.

(courtesy zero hedge)

JPMorgan Misses Across The Board On Disappointing Earnings, Outlook; Stealthy Deleveraging Continues

Maybe we now know why JPM decided to release results after market close instead of, as it always does, before the open: simply said, the results were lousy top to bottom, the company resorted to its old income-generating “gimmicks”, it charged off far less in risk loans than many expected it would, and its outlook while hardly as bad as it was a quarter ago, was once again  dour.

First, the summary results, in which JPM saw $23.5 billion in non-GAAP net revenues, because yes, JPM has a pre-GAAP “reported revenue” item which was even lower at $22.8 billion…

… missing consensus by $500 million, down $1 billion or 6.4% from a year ago.


While the Net Income at first sight seemed to be a beat, printing at $1.68, this was entirely due to addbacks and tax benefits, which amounts to a 31 cent boost to the bottom line, while for the first time, JPM decided to admit that reserve releases are nothing but a gimmick, and broke out the contribution to EPS, which added another $0.05 to the bottom line.


There were two surprises here: first, JPM’s legal headaches continue, and the firm spent another $1.3 billion on legal fees during the quarter – one assumes to put the finishing touches on the currency rigging settlement. Also, as noted above, instead of taking a credit charge, i.e., increasing reserve releases, JPM resorted to this age-old gimmick, and boosted its book “profit” by $450 million thanks to loan loss reserve releases, the most yet in 2015; ironically this comes as a time when JPM competitors such as Jefferies are taking huge charge offs on existing debt. It appears JPM is merely doing what Jefferies did for quarters, and is hoping the market rebounds enough for it to not have to mark its trading book to market.

While the release of reserves helped JPM in this quarter, unless the economy picks up substantially next quarter, JPM’s EPS will be hammered not only from the top line, but also from the long-overdue rebuilding of its reserves which will have to come sooner or later.

Completing the big picture, was something rather troubling we first noticed last quarter: JPM’s aggressive push to deleverage its balance sheet, by unwinding billions in deposits. Indeed, as the bank admits, it has now shrunk its balance sheet by a whopping $156 billion in 2015, driven by a massive reduction in “non-operating deposits” of over $150 billion. Perhaps the US does not need NIRP: it appears banks like JPM are simply saying not to deposits.


Then stepping away from the bank, and looking just at JPM’s most important division, its Investment Bank, there were no major surprises there: Fixed Income Revenue crashed by $854 million Y/Y to $2.933 billion, which however was in line with sellside expectations. The silver lining: equity markets revenue of $1.4 billion posted a modest improvement of $173 million from Q3 2014.

This is how JPM explained it:

  • Fixed Income Markets of $2.9B, down 11% YoY, excluding business simplification
  • Equity Markets of $1.4B, up 9% YoY, driven by strong performance across derivatives and cash

The punchline:

  • Firm loans-to-deposits ratio of 64%, up 8% since year-end

This was up to 61% last quarter, and is indicatively of the end of QE as the fed no longer pumps the company full of deposits without a matching loan increase.

Perhaps the most interesting thing about this slide was JPM’s admission at the very end that it had suffered $232 million in credit costs “reflecting higher reserves driven by Oil & Gas.” Considering this was a decline from the $299MM cost from a year ago, one wonders just how (in)sufficient this will be if and when the oil rebound once again fizzles.

Curiously, despite the most recent tumble in yields, JPM was happy to reported that after NIM rose by 2 bps last quarter, in Q3, “Firm NIM is up 7bps QoQ largely driven by positive mix impact of lower cash balances and higher loan balances.”

Finally, the outlook: while hardly as dour as last quarter when as a reminder JPM said “for 3Q15, expect business simplification to generate YoY negative variance in Markets revenue of 9%, with an associated reduction in expense”, this time the revenue guidance cut is only 2%. We expect this number to prove insufficient if the current market volatility continues.

JPM also said to “Expect 4Q15 YoY core loan growth to continue at 15%+/-.” So a 30% swing from top to bottom.


Oct 14 - Ex-Fed's Fisher: "FOMC has egg on its face"

Zerohedge - 1 hour 10 min ago





Put and Call Options: FEAR During the last five trading days, volume in put options has lagged volume in call options by 26.86% as investors make bullish bets in their portfolios. However, this is still among the highest levels of put buying seen during the last two years, indicating fear on the part of investors.

Market Volatility:  NEUTRAL The CBOE Volatility Index (VIX) is at 17.67. This is a neutral reading and indicates that market risks appear low.

Stock Price Strength: FEAR The number of stocks hitting 52-week lows exceeds the number hitting highs and is at the lower end of its range, indicating fear.




S&P 500 (ES) | NASDAQ 100 (NQ) | DOW 30 (YM) | RUSSELL 2000 (TF) Euro (6E) |Pound (6B)








LOCK NOV 8 PUT Activity on the BID side

LULU NOV 55 CALL Activity 2500 block @$1.20 on offer

EDGE SC 13D Filed by NEW LEAF Ventures .. 8.2%

TROX .. SC 13G Filed by Putnam Investments .. 13.2%

More Unusual Activity…



Fed's Bullard: Liftoff is appropriate despite challenges

Fed's Tarullo: US Rate hike likely not appropriate

Ex-Fed's Fisher: FOMC has egg on its face

Fed Discount Rate Mins: 8 votes to hike rate to 1% (vs 5 in July)

NY Fed: Consumers See Lower Inflation, Spending Growth --BBG

US NFIB Small Business Optimism Sep: 96.1 (est 95.5; prev 95.9)

ECB's Mersch: Near-term inflation may continue to hover near zero

BoE new boy Vlieghe says weak inflation may delay rate rise

BoE's McCafferty: Downside pressures in prices seen as transitory

Venezuela: Opec technical meeting to be held 21/Oct in Vienna; non-opec members Brazil, Russia, Norway among invitees



Fed's Bullard: Liftoff is appropriate despite challenges --ForexLive

Ex-Fed's Fisher: FOMC has egg on its face --CNBC

Fed's Tarullo: Rate hike likely not appropriate --CNBC

NY Fed: Consumers See Lower Inflation, Spending Growth --BBG

Fed Discount Rate Mins: 8 votes to hike rate to 1% (vs 5 in July)

Fed Discount Rate Mins: 3 voted to hold discount rate at 0.75%

Fed Discount Rate Mins: Minneapolis again voted to cut discount rate to 0.5%

ECB's Mersch: Near-term inflation may continue to hover near zero --Rtrs

BoE new boy Vlieghe says weak inflation may delay rate rise --MW

BOE's McCafferty wants rates at a level that they can cut again --ForexLive

BoE's McCafferty: Downside pressures in prices seen as transitory --FXstreet


Prices rise on growth fears, bets on later Fed rate hike --Rtrs

Treasuries Wilder Than Ever as Ultrafast Bond Traders Rise Up --BBG

Italian-German Bond Yield Spread Narrows to Least Since April --BBG

China picks London for renminbi debt issue --Eftee

Putin: IMF should provide additional $3 bln loan to Ukraine to repay its debt to Russia --TASS


USD: Dollar bulls vexed by Federal Reserve rate outlook --FT

COMMODITY FX: Weak Chinese data bogs down commodity FX --ET

CNY: PBoC fixed yuan higher for an 8th straight day --FT

GBP: Deflation takes pound down after M&A lift --FT


Venezuela: Opec technical meeting to be held 21/Oct in Vienna; non-opec members Brazil, Russia, Norway among invitees

WTI futures settle 0.9% lower at $46.66 per barrel

CRUDE: IEA: Oil market glut will persist through 2016 as demand growth slows --FT

METALS: Copper Prices Fall After Weaker-Than-Expected Chinese Import Data --WSJ

EXCHANGES: China's largest commodities exchange to build intl platform --FT

USDA: NZ milk production seen declining --BBG

EIA Drilling Productivity Report for October


EARNINGS: J&J got slammed by the strong dollar again --BI

EARNINGS: J&J plans to buy back shares up to $10bn --Yahoo

M&A: GE to sell $30 bln specialty finance business to Wells Fargo --Rtrs

M&A: Diageo to announce sale of wines unit --Sky

M&A: EMC to pay Dell $2 billion as breakup fee in go-shop period --Yahoo

LEGAL: SEC Prepares Civil Charges Against Mondelez in Cadbury Probe --WSJ

AUTOS: Volkswagen announces ?750m spending cuts to fund product revamp --Guradian

AUTOS: VW gloom hits German economic sentiment --FT

PRIVATISATION: UK government sells ?591m stake in Royal Mail --FT

TECH: Twitter Slashing Costs With Workforce Layoffs --Sky

TECH: Bloomberg: U.S. Wants To End Apple E-Book Antitrust Monitoring --Nasdaq

BANKS: Citi dials down risky block trading amid market turmoil --Rtrs



Economists gloomier on Brazil's inflation outlook --FT


'America The Herd' Is Ever At Odds With 'America The Civilization'

Zerohedge - 1 hour 13 min ago

Submitted by Dan Sanchez via,

“Make America Great Again” is the slogan for Donald Trump’s phenomenally popular presidential campaign.


With it, Trump has tapped a deep well of frustration among American conservatives about the direction of the country under President Barack Obama.

This longing for lost greatness especially concerns American foreign policy (although upon close examination Trump’s actual statements are less hawkish than those of his Republican rivals).

Conservatives are sick of America looking weak on the world stage. They sense that Obama has transmitted his own lack of virility to the nation as a whole. 

Many blame the spectacular and gruesome rise of ISIS on Obama for having pulled out of Iraq. The bad guys are on the rise, because our leader wasn’t “man enough” to stay and stand up to them. As the great George Carlin said:

“This whole country has a manhood problem. Big manhood problem in the USA. You can tell from the language we use; language always gives you away. What did we do wrong in Vietnam? We pulled out! Not a very manly thing to do is it?”

Masculine Trump promises to be different. Oh sure, he wouldn’t have invaded Iraq in the first place. But if he had inherited the occupation, he wouldn’t have pulled out until he had taken all of the country’s oil. A “real man” doesn’t leave until he gets what he wants.

And now, so this narrative goes, Obama has “yielded,” on behalf of America, to both Cuba and Iran. Trump, who presents himself as a masterful business negotiator, sneered at Obama’s nuclear deal with Iran as, “one of the weakest contracts I’ve seen of any kind.”

But perhaps most emasculating of all is Obama’s feeble showing next to the famously tough Russian president Vladimir Putin. Virile Vlad has taken Obama’s lunch money time and again.

Putin frustrated Obama’s plan to launch an air war on Syria by calling Secretary of State John Kerry’s bluff over a chemical weapons deal with the Syrian regime.

Putin countered the Washington-backed coup in Ukraine by swiftly annexing its Crimean province without firing a shot.

And now, in a blitzkrieg campaign, Putin seems to be smashing in a matter of days the ISIS menace that Obama declared war on eight months ago.

Many Americans look at Putin with a mix of fear, hate, and envy. They wish they had a leader like him, and hope Trump will fill that role. Trump himself has predicted that as president he will get along with his Russian counterpart, because Putin will respect him (perhaps as a fellow alpha male). In contrast, Trump added, Putin, “has absolutely no respect for President Obama. Zero.”

It is conceivable that Obama feels he has something to prove as a spindly former community organizer, and that is why he has been susceptible to be pressured into foreign interventions by the neocons (like Victoria Nuland of the Ukraine debacle) and liberal interventionists (like Hillary Clinton, Susan Rice, and Samantha Power of the Libya debacle) in his administration (especially the above female ones), as well as his steely-eyed generals (like Stanley McChrystal and David Petraeus of the Afghan Surge debacle).

And perhaps Obama’s non-martial inclinations have curbed his commitments to these foreign misadventures, preventing them from being quite as grandly calamitous as Bush’s, while at the same time making him look timorous and indecisive.

It may be tempting to think that Trump is comfortable enough in his own masculinity to not start fights he can’t finish, and that this is why he strays from the GOP script on Iraq, Syria, and Russia.

But ultimately it is a waste of time to pore over what candidates say on the hustings. Politicians are generally inveterate liars and manipulators whose policies in office rarely match their rhetoric, and often don’t even resemble it.

What is important is why the rhetoric is successful: why it resonates with the public and what that says about the spirit of the times, which is what actually limits or enables the rapacity of government.

What exactly are conservatives longing for when they clamor to Make America Great Again? What do they even mean by “America”?


It could be any of three senses, each of which was expounded by the great American journalist Randolph Bourne in his 1918 essay “The State.”

They could mean America the Country. According to Bourne, when speaking of country or nation:

“We think vaguely of a loose population spreading over a certain geographical portion of the earth’s surface, speaking a common language, and living in a homogeneous civilization. Our idea of Country concerns itself with the non-political aspects of a people, its ways of living, its personal traits, its literature and art, its characteristic attitudes toward life.”

Or they could mean America the State. According to Bourne:

“The State is the country acting as a political unit, it is the group acting as a repository of force, determiner of law, arbiter of justice.”

It is important to note that Bourne’s idea of the State is distinct from his idea of government, which is:

“…the machinery by which the nation, organized as a State, carries out its State functions. Government is a framework of the administration of laws, and the carrying out of the public force. (…) That the State is a mystical conception is something that must never be forgotten. Its glamor and its significance linger behind the framework of Government and direct its activities.”

And in wartime, the State eclipses all else, as the alarmed populace amalgamates into a herd, huddling and stampeding in unison under the guiding rod of government-as-shepherd:

“Wartime brings the ideal of the State out into very clear relief, and reveals attitudes and tendencies that were hidden. (…) For war is essentially the health of the State. The ideal of the State is that within its territory its power and influence should be universal. (…) And it is precisely in war that the urgency for union seems greatest, and the necessity for universality seems most unquestioned. The State is the organization of the herd to act offensively or defensively against another herd similarly organized. The more terrifying the occasion for defense, the closer will become the organization and the more coercive the influence upon each member of the herd.”

Bourne noticed a key problem for clearly thinking about these matters:

“The patriot loses all sense of the distinction between State, nation, and government.”

As a result, these terms have become thoroughly confused.

The terms “patriotism” and “nationalism” as used by today’s arch-conservatives refer to attitudes that used to be called “jingoism.” So, what is today called “country” in the sense of “patriotism” and “nation” in the sense of “nationalism” is actually what Bourne referred to as “the State.”

What is today called “the State” Bourne instead called “government.”

And what Bourne meant by “country” and “nation” is a concept so neglected today, that it doesn’t really have its own name at all.

It will clarify things if we adopt our own set of labels for Bourne's rigorous concepts: one that doesn’t confusingly contradict current usage as Bourne’s does, but also doesn’t have the deceptive Orwellian qualities of standard modern parlance.

Our meaning should be unmistakable if we speak of America the Civilization, America the Herd, and America the Regime.

Those who display the “Make America Great Again” injunction on baseball caps and bumper stickers are specifically hoping for a particular prospective government official to fulfill it. So, they are clearly not saying “Make the American Civilization Great Again.”

Yet they are also saying far more than “Make the American Regime Great Again.” They are not merely concerned with the glory of the Federal government.

What Trump’s supporters desperately want is to Make the American Herd Great Again. And by “Great,” they mean big, imposing, mighty, and fearsome.

In a time of sparse grazing (that is, a deep economic recession), they are irrationally alarmed at perceived economic inroads being made by the Mexican and Chinese Herds.

And in a time of military and diplomatic humiliation (see above), they are irrationally terrified that the Russian, Chinese, and Muslim Herds may someday supplant or even overrun them.

They want their Herd’s military stampede to be irresistible and earthshakingly awesome again, and its huddle (immigration and trade barriers, the national security state, etc.) to be impenetrable and intimidatingly forbidding. And they are looking to Trump to restore these herd characteristics as the new strongman shepherd.

This is why Trump’s vaunted masculinity is so important. His fans want their shepherd to have a firm hand, like a stern but protecting father.

As Bourne explained:

“There is, of course, in the feeling towards the State a large element of pure filial mysticism. The sense of insecurity, the desire for protection, sends one’s desire back to the father and mother, with whom is associated the earliest feelings of protection. It is not for nothing that one’s State is still thought of as Father or Motherland, that one’s relation towards it is conceived in terms of family affection.”

And this is especially true in times of war such as ours. Bourne added that the wartime State’s…

“… chief value is the opportunity it gives for this regression to infantile attitudes. In your reaction to an imagined attack on your country or an insult to its government, you draw closer to the herd for protection, you conform in word and deed, and you act together. And you fix your adoring gaze upon the State, with a truly filial look, as upon the Father of the flock, the quasi-personal symbol of the strength of the herd, and the leader and determinant of your definite action and ideas.”

But in order for this filial piety toward the Herd to really take hold, there usually needs to be a figurehead with a face, a name, and a personality to function as a devotional focal point: a father-figure embodiment of the Herd itself. This was the function of Big Brother in George Orwell’s Nineteen Eighty-Four. And this is the function of Trump in his supporters’ dreams of an American Herd made great again.

If America’s spooked-herd mindset continues to intensify, it could even turn the populist demagogue Trump into Nationalist America’s answer to Nationalist Italy’s Benito Mussolini: our “Il Douche” to their “Il Duce.”


Conservatives need to snap out of their fight-or-flight response, take a moment to step out of the fevered haze of election season, and realize that there is no need or good reason to seek provision and protection in a Herd. (Class warrior leftists are also guilty of this in their own way.)

The shepherds they bleat for don’t tend to their flocks for the sake of the protection and provision of the sheep, but for the sake of their own wool and mutton. And such regime herdsmen are the ones who set herds against each other in order to divide and rule.

And protection and provision cannot be sustainably achieved through the bestial means of swarming and stampeding over outsiders. The “biological competition” (as Ludwig von Mises called it) of tribalism and warfare (both military and economic) is a zero-sum game. And it ultimately only endangers and impoverishes all by breaking down the positive-sum division of labor (social competition and cooperation), which is the rational and characteristically human means of attaining protection and provision.

As Mises taught, civilization is based on the division of labor, which in turn depends on respect for individual property rights (including self-ownership): in a word, justice.

The more that justice reigns, the more intensified and productive will be the division of labor, and the more the populace will be civilized: i.e., economically integrated, prosperous, and peaceful.

Justice (liberty and property) is what makes a civilization great. And civilization is what makes a populace rich and safe. In short, being good is what makes a people truly great.

Being good means peaceful and voluntary exchange, both commercial and cultural, to the enrichment of all, both material and spiritual.

Being good means not making enemies throughout the world by bombing, starving, and subjugating potential fellow members of the ecumenical market society and excusing it as “foreign policy,” “global strategy,” and “collateral damage.”

Being good means not pretending to have a partial claim over every single piece of private or “public” property under your government’s illegitimate jurisdiction, such that you can exclude others from it based on them being born under a different illegitimate jurisdiction.

And as the left needs to realize, being good also means not raiding the coffers of other socio-economic “classes” simply because they have more than you, and excusing it as “addressing wealth inequality.”

In other words, being good means acting like decent human beings, and not like a ravenous, paranoid, amoral Herd.

America the Herd is ever at odds with America the Civilization. It is America the Herd that is keeping America the Civilization from feeling and being prosperous and safe. For too long, we have let our rulers ride us roughshod, using us to trample the economy and global tranquility with its economic and military interventions.


Apocalyptic Islamophobes like to speak of a “Clash of Civilizations,” but that is a contradiction in terms. Civilization is a concept of natural, unforced harmony. It is Herds that clash, not Civilizations. Civilizational commonalities may determine who is considered in the fold. But it is the Herd dynamic that hurls the throngs against each other.

And such clashes damage civilization in two senses. Civilization is degraded domestically, as the heterogenous dance of individuals yields the stage to the homogenous march of the horde.

And civilization between the two peoples is shattered as well.

There are many nested levels of civilization. Within the American civilization, there are distinctive sub-civilizations. The Midwest, the Northeast, the South, etc, each have their own recognizable subcultures and trading networks, even though they are also to some extent integrated with the broader American culture and trading network.

All these civilizations are, in turn, integrated with a broader Western civilization. And Western civilization has certain cultural affinities and (especially) economic relationships with virtually all the rest of the world as well.

So, no matter how distinctive two sets of people are, military and economic warfare between them breaks the bonds of civilization that culturally and materially enrich them both.


Next time someone accuses you of “hating America” for denouncing beastly policies and the tribalism that endorses and enables such savagery, tell them, “I love America the Civilization, which is why I despise America the Herd. For you, it seems to be the other way around.”

Make America good again, and the kinds of greatness actually worth having will naturally follow.

Bond Market Breaking Bad - Credit Downgrades Highest Since 2009

Zerohedge - 1 hour 39 min ago

Despite The Fed's best efforts to crush the business cycle, the crucial credit-cycle has reared its ugly head as releveraging firms (gotta fund those buybacks) and deflationary pressures (liabilities fixed, assets tumble) have led to a surging market cost of capital.

As WSJ reports, softening U.S. corporate fundamentals have been largely overlooked but the markets for riskier debt have become snarled with rising downgrades and an increase in U.S. corporate defaults indicate “some cracks on the surface” of the domestic-growth outlook. In fact, in the latest quarter, the ratio of upgrades-to-downgrades is its weakest since the peak of the financial crisis in 2009.

Falling profits and increased borrowing at U.S. companies are rattling debt markets, a sign the six-year-long economic recovery could be under threat.


Credit-rating firms are downgrading more U.S. companies than at any other time since the financial crisis, and measures of debt relative to cash flow are rising.



Standard & Poor’s Ratings Services downgraded U.S. companies 297 times in the first nine months of the year, the most downgrades since 2009, compared with just 172 upgrades.


Meanwhile, the trailing 12-month default rate on lower-rated U.S. corporate bonds was 2.5% in September, up from 1.4% in July of last year, according to S&P.


Analysts expect profits at large companies to decline for a second straight quarter for the first time since 2009.


U.S. companies have increased borrowing to levels exceeding those just before the financial crisis, as firms pursue big acquisitions and seek to boost stock prices by buying back shares. According to one metric, the ratio of debt to earnings before interest, taxes, depreciation and amortization for companies that carry investment-grade ratings, meaning triple-B-minus or above, was 2.29 times in the second quarter. That’s higher than the 1.91 times in June 2007, just before the crisis, according to figures from Morgan Stanley.

“We’re seeing more widespread weakness across more industry sectors in the U.S.,” Ms. Vazza said. “It’s become broader than just the commodity story.”


“The metrics that you measure health and credit by have peaked a while ago,” said Sivan Mahadevan, head of credit strategy at Morgan Stanley. “They are beginning to deteriorate.”

*  *  *

You Are Here...

JPMorgan Misses Across The Board On Disappointing Earnings, Outlook; Stealthy Deleveraging Continues

Zerohedge - 2 hours 6 min ago

Maybe we now know why JPM decided to release results after market close instead of, as it always does, before the open: simply said, the results were lousy top to bottom, the company resorted to its old income-generating "gimmicks", it charged off far less in risk loans than many expected it would, and its outlook while hardly as bad as it was a quarter ago, was once again  dour.

First, the summary results, in which JPM saw $23.5 billion in non-GAAP net revenues, because yes, JPM has a pre-GAAP "reported revenue" item which was even lower at $22.8 billion... 

... missing consensus by $500 million, down $1 billion or 6.4% from a year ago.


While the Net Income at first sight seemed to be a beat, printing at $1.68, this was entirely due to addbacks and tax benefits, which amounts to a 31 cent boost to the bottom line, while for the first time, JPM decided to admit that reserve releases are nothing but a gimmick, and broke out the contribution to EPS, which added another $0.05 to the bottom line.


There were two surprises here: first, JPM's legal headaches continue, and the firm spent another $1.3 billion on legal fees during the quarter - one assumes to put the finishing touches on the currency rigging settlement. Also, as noted above, instead of taking a credit charge, i.e., increasing reserve releases, JPM resorted to this age-old gimmick, and boosted its book "profit" by $450 million thanks to loan loss reserve releases, the most yet in 2015; ironically this comes as a time when JPM competitors such as Jefferies are taking huge charge offs on existing debt. It appears JPM is merely doing what Jefferies did for quarters, and is hoping the market rebounds enough for it to not have to mark its trading book to market.

While the release of reserves helped JPM in this quarter, unless the economy picks up substantially next quarter, JPM's EPS will be hammered not only from the top line, but also from the long-overdue rebuilding of its reserves which will have to come sooner or later.

Completing the big picture, was something rather troubling we first noticed last quarter: JPM's aggressive push to deleverage its balance sheet, by unwinding billions in deposits. Indeed, as the bank admits, it has now shrunk its balance sheet by a whopping $156 billion in 2015, driven by a massive reduction in "non-operating deposits" of over $150 billion. Perhaps the US does not need NIRP: it appears banks like JPM are simply saying not to deposits.


Then stepping away from the bank, and looking just at JPM's most important division, its Investment Bank, there were no major surprises there: Fixed Income Revenue crashed by $854 million Y/Y to $2.933 billion, which however was in line with sellside expectations. The silver lining: equity markets revenue of $1.4 billion posted a modest improvement of $173 million from Q3 2014.

This is how JPM explained it:

  • Fixed Income Markets of $2.9B, down 11% YoY, excluding business simplification
  • Equity Markets of $1.4B, up 9% YoY, driven by strong performance across derivatives and cash

The punchline:

  • Firm loans-to-deposits ratio of 64%, up 8% since year-end

This was up to 61% last quarter, and is indicatively of the end of QE as the fed no longer pumps the company full of deposits without a matching loan increase.

Perhaps the most interesting thing about this slide was JPM's admission at the very end that it had suffered $232 million in credit costs "reflecting higher reserves driven by Oil & Gas." Considering this was a decline from the $299MM cost from a year ago, one wonders just how (in)sufficient this will be if and when the oil rebound once again fizzles.

Curiously, despite the most recent tumble in yields, JPM was happy to reported that after NIM rose by 2 bps last quarter, in Q3, "Firm NIM is up 7bps QoQ largely driven by positive mix impact of lower cash balances and higher loan balances."

Finally, the outlook: while hardly as dour as last quarter when as a reminder JPM said "for 3Q15, expect business simplification to generate YoY negative variance in Markets revenue of 9%, with an associated reduction in expense", this time the revenue guidance cut is only 2%. We expect this number to prove insufficient if the current market volatility continues.

JPM also said to "Expect 4Q15 YoY core loan growth to continue at 15%+/-." So a 30% swing from top to bottom.


Here is the full outlook for what was a quarter JPM would be happy to forget

Is This 2000, 2007 Or 2011?

Zerohedge - 2 hours 29 min ago

Submitted by Lance Roberts via STA Wealth Management,

In last week's update, I discussed the short-term oversold condition that existed at that time. To wit:

"As you can see, the markets did retest the late August lows, and when combined with the very oversold conditions, led to a frantic "short covering" rally back to previous resistance. It is worth noting that the recent market action is very similar to that of the August decline and initial rebound as well.


Of course, the question that must be answered is whether we have seen the end of the current correction or is this just another "reflexive rally" that will fail?"

The chart below is updated through yesterday's close.

Currently, the bulls have clearly been in charge of the market. The question is for "how long?"

While last week's FOMC minutes gave the "bulls" some confidence that the Federal Reserve is not removing its accommodative policy, it was the massive amount of short-interest (people betting on markets to fall) that provided the fuel. 

The chart above, from ZeroHedge, shows the massive jump in short-interest that has to be covered as stock prices rise. When players are "short the market," bullish reversals in prices force traders to close out their positions by "buying" into the market. This fuels additional buying, which pushes prices higher, which forces more players to close out their short positions. This cycle continues until the "fuel" is exhausted. This is why market rebounds tend to be extremely sharp and fast, but also fade just as quickly.

For a visualization think about the "Whoosh Bottle" where an air/gas mixture is fairly inert until ignited by a catalyst. (Vine by @scienceporn)

That mixture of oversold market conditions, combined with a sharp rise in "short interest" in the market, was the perfect accelerant waiting on a match.  That match was the Fed failing to hike rates and a lack of China in the headlines. 

However, there is a big difference between a fundamentally based "bull market" advance and a short-covering rally in a "bear market" cycle. While it is too early to say that we are indeed in a bear market, there are many indications such is indeed the case as I discussed yesterday in "4 Warnings."  

  • Profit margins have had a 60bp decline.
  • Margin debt has fallen below its moving average.
  • Valuations have started to contract.
  • Economic measures have fallen sharply.

Add to those fundamental arguments the technical deterioration of momentum and relative strength in the market and a more worrisome picture emerges. 

Importantly, despite many of the mainstream calls for a continued bull market, it is worth noting that historically the negative alignment of both the fundamental warnings and technical indicators have only occurred at the onset of more protracted bear market declines.

Could this time be different? It's possible, particularly if the Federal Reserve once again intervenes with more liquidity driven monetary policy. However, such action by the Federal Reserve seems unlikely as they are focused on "tightening" monetary policy by hiking interest rates, rather than "loosening" it with additional liquidity. Of course, another sharp decline in the market that erodes consumer confidence will likely quickly change their stance. 

Is This 2000, 2007 or 2011?

One of the primary arguments by the more "bullish" media is that the current setup is much like that of 2011 following the "debt ceiling" debate and global economic slowdown caused by the Tsunami in Japan. 

While there are certainly some similarities, such as the weakness being spread from China and a market selloff, there are some marked differences. 

From a fundamental standpoint the Federal Reserve, along with the ECB, were actively engaged in pushing support for the financial markets globally. This is not the case today, as stated above.

Furthermore, the economy was "saved" in Q3 and Q4 of 2011 by the warmest winter in 65 years that allowed for continued manufacturing and production during a period when inclement weather is generally a concern. This also coincided with the "reboot" in Japan which allowed for "pent up" demand to be filled. As we once again face an extremely cold winter period, as we saw in the last two, the outcome fundamentally is far different. 

From a technical backdrop, there is a striking difference as well. In 2011, asset prices plunged on fears of a "debt default" coupled with the lack of liquidity following the end of QE 2. However, price momentum and the relative strength of the underlying market internals remained bullishly biased. 

Currently, the technical deterioration is more aligned with the previous bear market cycle as "sell signals" have been registered for only the third time since the turn of the century. With only one "sell signal" not registered, the moving average crossover, there is a minor "hope" for the bulls at this juncture. However, given the steepness of the decent it is likely that signal will be registered in the weeks ahead if the "bulls" are unable to gain solid footing and push markets to new highs fairly quickly. 

No matter how you want to view the market, it is hard to make the case that this is simply just a correction within an ongoing bull market cycle. As I quoted in yesterday's post (Edward Harrison):

"We are now in the seventh year of a cyclical recovery and bull market. Shares have tripled in that time frame. I would say this means we are much closer to the end of the business cycle than the beginning.


To me, the pre-conditions for this profits recession speak to downside risk, both for risk assets and for the real economy. None of the data speaks to recession in the real economy right now. We are seeing a slowing of job growth and likely of trend economic growth as well. But with a profits recession hitting, the potential for further downside is high."

That view, combined with the fundamental and technical backdrop that is more aligned with historical bear market cycles, suggests that excessive risk taking currently is ill-advised. If the backdrop changes to a conducive environment, then that view will change accordingly. For now, it remains prudent to use rallies to reduce risk. Remember, it is always easier to get back into the market once the path higher is clear. Conversely, it is harder, and a bit pointless, to keep using rallies simply to make up previous losses. Getting "back to even" is simply not a viable long-term investment strategy.


Biotechs Bruised & Trannies Trounced As VIX 'Losing' Streak Comes To An End

Zerohedge - 2 hours 53 min ago

Today's market analogy... (hint - gets exciting at around 40 seconds)


We dumped (on China data, major CNH weakness into China close, and European data), we pumped (because markets opened in 'Murica) and we dumped again (when Europe closed and overnight high stops were tagged) on absolutely no news whatsoever...


Ugly day for Trannies, dumped into the close...


Just as we warned...WTF was going on yesterday?


From Friday, The Dow was sustained green for as long as possible as Trannies got trounced...


VIX's 10-day "losing" streak has come to an end...


VIX is catching 'up' to stocks...


As it appears VXX found support having re-filled the Black Monday gap...


Biotechs were battered and broke a key support trendline... (prepare for the Hillary-bashing)


Ahead of the big banks' earnings, credit markets remain notably more concerned...


Stocks seemed to track Crude perfectly - giving up on USDJPY and bonds After Europe Closed...


With the re-opening of the bond market, buyers returned (as it appears Dell/EMC rate locks have been completed)...


The USDollar trod water for the second day against the majors (despite major AUD weakness)...


But soared 0.4% against Asian FX - its biggest gain in 7 weeks...


Gold and silver gained on the day, jumping at the US open after weakness overnight, while crude and copper slid...


Crude dumped on China trade data then bounced at the US open on algo-idiocy, before fading back... biggest 2-day loss in 2 months...


Gold & Silver dropped on China Trade then ripped after the 8amET witching hour...


Charts: Bloomberg

Bonus Chart: Rate-hikes are disappearing over the horizon again...


Bonus Bonus Chart: What's Next? (h/t @StockCats )

And Now The Bad News: Millennials Will Need To Withdraw $270K Per Year From Their Retirement Accounts

Zerohedge - 2 hours 59 min ago

Via ConvergEx's Nicholas Colas,

Which profile fits a money manager’s ideal customer – a “Mass affluent” 50-year old or a dead broke 20-something? The wealth management industry would do well to run the numbers, because it is the latter that will generate a larger fee stream over time. 


How can that be? The short answer is that millennials will live longer, require far more in retirement savings, and use more high margin investment products for longer than their parents’ generation.


This simple calculus seems beyond the reach of an industry that still commonly features high minimum balances for advisory services and does little in the way of outreach to younger customers. So called “Robo-advisors” have begun to gather up this group of younger investors, but there is still plenty of time for the traditional money management industry to service this next, much larger, wave of customers. 

Note from Nick: I am 51; Jessica is 21. I have a lifetime of savings, equity in a house, and disposable income to invest. Jessica has a lot of talent and a few thousand dollars saved from her 2 years of full time work. And when I see advertisements for money managers, they all clearly target me. Turns out that is a bad strategy, because the industry will make a lot more money from Jessica than they ever will getting my hard earned shekels to manage.  Read on for the whys and wherefores….  And just how much more valuable millennials are than old folks like me. 

Are you more afraid of death or poverty? This may seem like an odd question with an obvious answer: the Grim Reaper should engender more fear than an overdraft charge. Surveys, however, surprisingly suggest that poverty weighs heavily indeed on many people’s psyches in light of longer life expectancies and uncertainty about Social Security payouts. Consider these findings:

Sixty-one percent of respondents to a 2010 Allianz survey of 3,257 people said “they were more scared of outliving their assets than they were of dying”.This figure increased to 77% for those between the ages of 44 and 49, and as high as 82% for those “in their late 40s who had dependents”.


Moreover, 58% to 60% of all participants “worry about longevity”. One cause of financial stress relates to Social Security benefits: “39% feel they're more likely to be hit by lightning than to get their full due from Social Security. For middle-class respondents, this number rose to 56%.”


A 2014 survey conducted by Wells Fargo of 1,001 middle-class Americans (aged 25-75) said “they would rather ‘die early’ than not have enough money to live comfortably in retirement”.


Despite this fear, “61% of all middle-class Americans, across all income levels included in the survey, admit they are not sacrificing ‘a lot’ to save for retirement”. Younger adults either don’t save or push it off: “More than half (55%) … say they plan to save “later” for retirement in order to ‘make up for not saving enough now.’ For those between the ages of 30 and 49, 59% say they plan to save later to make up retirement savings, and 27% are not currently contributing savings to a retirement plan or account”. Yet, “72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65% in 2013”.

This misguided plan to save later as a means to make up for lost ground in the present circumvents the benefits of compounded returns over time. With that said, young adults are at a disadvantage when taking it upon themselves to hire a financial advisor at a major financial services firm. Minimum investments typically start at $25,000, a large lump sum for millennials trying to pay off record levels of student loan debt. Automated financial advisors have disrupted the banking industry by offering passive money management with lower fees and low/or no minimum investment. The difference between a traditional wealth management firm and robo-advisors boils down to the latter’s ability to realize the future potential earnings power of millennials despite their current cash-strapped state. There’s a lot more to the model that that. No human advisors, a different investment approach, that appeal to tech-savvy millennials. 

Now, it is fair to ask why the traditional money management industry should care about a bunch of millennials with minimal savings, lots of college debt, and uncertain economic futures. The answer, which we will outline in the remainder of this note, is that they are actually worth more today than a typical 50 year old “Mass affluent” customer. We undertook an exercise to compare the current value of millennial customers versus baby boomers. Our findings showed that the industry’s focus on Baby Boomers is shortsighted, and a typical millennial will be a far more profitable customer over time. Here’s an outline of the math:

Assuming 2% inflation – the Federal Reserve’s current target – over the next 50 years, or when millennials enter retirement, they will need to withdraw about $270,000 per year from their retirement plans. That’s the equivalent of $100,000 today adjusted for inflation 50 years from now, as we assume millennials will retire at age 70. By contrast, the remainder of baby boomers will likely retire at age 67. Adjusting for 2% inflation for the next roughly 15 years off a $100,000 base today suggests they need to withdraw about $135,000 per year in retirement.


Given these withdrawal figures, we also took into account that millennials will likely live until 100, and baby boomers until 85. Therefore, the former cohort will need to invest their savings to support withdrawals of $270,000 each year for 30 years, and the latter group $135,000 for roughly 18 years.


In the case of millennials, we fully invested their savings in equities from the age of 21 to when they retire at 70. We also applied a 7% annual growth rate in equities and accounted for a 1% management fee. Come their 71st birthday, we split their portfolio into a 50/50 stock to bond mix with an annual return of 7% for stocks and 3% for bonds. Rather than adding money, we adjusted for distributions of $270,000 per year.

In order to amass enough capital to keep our model millennial out of the poor house until age 100, we estimated a savings plan that gradually increases over the years as their earnings power grows. During the first 5 of the 50 potential years of work, millennials will need to save at least $1,000 annually, or about $83 per month. This may seem arduous currently in light of student loan payments in addition to other expenses like rent, but every little bit as early on helps in the future. This number must rise to $10,000 during the subsequent 5 years as their careers get underway, and $20,000 by age 31 for another 5 years. Once they reach age 36, millennials need to contribute $25,000 into their savings plans until retirement. This will leave them with about $275,000 at the end of their century-long lives.

As for baby boomers, we constructed a portfolio consisting of only equities from the age of 50 until retirement at 67.  We started them off with preexisting savings of $455,000. We also used the same management fee (1%) and expected equity returns (7% annually) as we did for millennials, and added $22,000 to the savings pot annually from age 50 to 67 (or the maximum contribution allowed into a 401k plan for that age and up). Accounting for a 50/50 split between stocks and bonds in addition to withdrawals of $135,000 during baby boomers’ 20 years of retirement, they’d end with just over $20 grand at age 85.


With a 1% management fee for equities and a 0.25% management fee for fixed income, millennials represent a fee stream totaling +$1.2 million customers for money managers in total terms, and +$450 K in current figures over their lifetimes of investing. By contrast, baby boomer customers will only earn the money management industry +$300,000 in total, or +$220,000 in today’s terms for the remainder of their lives.

In sum, financial services firms may not earn high fees during the beginning of millennials’ careers, but should appreciate the benefit of this cohort as customers in addition to baby boomers. They could gain more than $800,000 (+$200,000 today) in the long run by serving a millennial. We also recognize that the savings we attributed to the latter years of a millennial’s career exceeds the current annual maximum of $18,000 in a 401k plan. We expect this to lift in order to help millennials keep up with inflation and meet their retirement goals. In the meantime, automated financial advisors, such as Wealthfront and Betterment, will continue to build their product offerings in order to exploit these inefficiencies and scoop up millennial customers before they are worth traditional money managers’ time.

These Are The 50 "Most Hated" NYSE And Nasdaq Stocks

Zerohedge - 3 hours 12 min ago

While many will debate if the S&P500 correction "scare" bottomed in late September, and as a result of another round of abysmal economic data, and a historic short squeeze, the lows for the summer swoon are now in as a Fed rate hike has been all but written off and "hope" for more central bank intervention is back on the table, one thing is clear: for a brief moment good news was good news, and bad news was bed news as the role of the suddenly discredited Fed seemed disturbingly fleeting, and stocks were evaluated on a metric they have not been held accountable to for a long time: their own fundamental merit.

As such, the dramatic moves in the second half of September briefly removed the opium clouds built up from seven years inhaling excess liquidity vapors, and presented a sober and untainted look at the true fundamental situation.

This is why we were curious to observe what the traditionally far more rational, and skeptical, bearish community had to say about the real "quality" of the worst stocks on both the NYSE and the Nasdaq in those two brief weeks when things seemed to be getting back to normal: the stocks which if and when the Fed does lose control, would be the first to "go."

To do that, we pulled the Factset data listing the 50 "most hated" names on the two exchanges, as ranked by short interest as a % of total float.

Here are the answers, starting with the 50 most hated NYSE stocks...


... and the 50 most hated Nasdaq stocks.

And incidentally, those still unconvinced that the move int he past two weeks has been entirely on the back of squeezed shorts, here is one relevant data point: in the two weeks ended Sept 30, the biggest increase in absolute short interest, rising by a whopping 180% or 1.3 million shares to 2.1 million, was none other than the ProShares Ultra S&P500 ETF. It is safe to say that all those shorts have now been wiped out.




Pipeline Politics: Russia, Turkey Clash Over Energy As Syria Rift Shifts Focus To German Line

Zerohedge - 3 hours 28 min ago

In June, we noted that Russia had signed an MOU with Shell, E.On and OMV to double the capacity of the Nord Stream pipeline, the shortest route from Russian gas fields to Europe.  

Here is a helpful visual:

What you’ll note from the above is that the Nord Stream allows Gazprom to dodge Ukraine, which is desirable for obvious reasons. 

Of course that’s not good for the Eastern European countries (like Ukraine) who derive revenue from the flow of gas. Late last month, Slovak PM Robert Fico had the following to say about the Nord Stream project: 

“They are making idiots of us. You can’t talk for months about how to stabilize the situation and then take a decision that puts Ukraine and Slovakia into an unenviable situation.”

To which we said the following:

When it comes to making grand public declarations about “stabilizing” unstable geopolitical situations and then turning around and doing something completely destabilizing, the West (and especially the US) are without equal, as evidenced by all manner of historical precedent including Washington’s efforts to help sack Viktor Yanukovych whose ouster precipitated the conflict in Ukraine in the first place. And make no mistake, to the extent there’s energy and money involved, that’s all the more true which is why it isn’t at all surprising that Western Europe would facilitate a deal that lets Gazprom bypass a war zone if it means getting natural gas to countries that “matter” in a more efficient way.

In an interesting, if predictable twist, Western Europe may need to step up its cooperation with Gazprom even further going forward because now, the conflict in Syria has strained the energy relationship between Moscow and Ankara. Specifically, several purported Russian violations of Turkey’s airspace have made President Erdogan "irate" and more generally, The Kremlin’s support for the Assad regime has angered Turkey, which has long supported and worked to facilitate his ouster. Here’s a bit of color from FT:

Last year, Recep Tayyip Erdogan, then Turkey’s prime minister, was one of the only western statesmen to attend the opening ceremony of the 2014 Winter Olympics in Sochi. On the sidelines he met President Vladimir Putin and hailed the strong ties that bound Russia and Turkey.


Such warmth seems a distant memory today.


The two men are at loggerheads over Syria, and their spat threatens an important energy relationship: Turkey is the second-largest consumer of Russian natural gas. A new pipeline across the Black Sea was supposed to cement the partnership. Its future is now murky.


Last week, an irate Mr Erdogan, now Turkey’s president and still the country’s unquestioned leader, warned that, because of its military intervention in Syria, Russia risked forfeiting a $20bn contract to build a nuclear power plant on Turkey’s Mediterranean coast. Ankara could also source its gas from elsewhere, he warned.

But that's where things get tricky because as Bloomberg noted on Monday, "Russian gas keeps the lights on in Turkey":

Nearly 75 percent of Turkey's energy use is derived from outside sources, with Russia alone accounting for one-fifth of Turkey's energy consumption, more than any other. Russia's Rosatom is scheduled to start building Turkey's first nuclear plant next year and the two countries are also partners on a major new natural gas pipeline, known as TurkStream, which will eventually allow Russia to send its natural gas into the heart of Europe via the Turkish-Greek border rather than through embattled Ukraine. Gazprom, the world's largest natural gas producer and a TurkStream signatory, recently announced that the project would be delayed and capacity cut. Turkey represents Gazprom's second largest market after Germany. 

Read the last bolded passage there and then, referring back to the map shown above, follow the Nord Stream right into ... Germany. Once again, here's Bloomberg:

Putin feels able to change tack on Turkey, the second-largest customer for Russian gas, because in September he agreed to expand the Nord Stream pipeline that links Russia directly with Germany.


“Putin is betting on Nord Stream, but that bet is risky," Sijbren de Jong, energy security analyst at the Hague Centre for Strategic Studies, said by e-mail. "Can Gazprom really afford to annoy Turkey and forgo gas revenues? Hardly."


Europe receives about a third of its gas from Russia with a third of that volume flowing through Ukrainian pipelines. Gazprom aims to end or at least cut its gas transit through the former Soviet republic after the current transit contract expires in 2019.


Putin said last year that the new Turkey route would help Russia to meet this goal. After talks on the link stalled over the summer, Gazprom said that the Baltic Sea link directly to Germany known as Nord Stream-2 was a priority.


Putin’s bet on Nord Stream-2 is risky as the project may face opposition in the EU, De Jong said. EU Energy Commissioner Miguel Arias Canete said last week the link risked concentrating 80 percent of the bloc’s Russian gas imports on one route while eastern European nations have also warned of the risk of circumventing Ukraine.


Gazprom said Tuesday that key markets for Nord Stream-2 are boosting gas purchases from Russia, with total European exports in early October gaining almost 36 percent from last year’s level.

There are two takeaways here. First, all of this underscores the degree to which geopolitics and energy are inextricably bound up and that serves to strengthen the thesis that part of what triggered the conflict in Syria were energy disputes between the two regional axes of power. Although Moscow and Ankara have thus far kept it civil in order to preserve and expand trade, it now looks as though each country may be willing to Plaxico themselves all because they disagree over what the fate of Bashar al-Assad should be.

Second, Turkey needs to be careful here. If Erdogan effectively kills the Turkish Stream because Russia is bombing anti-regime forces in Syria, then Ankara had better hope Moscow and Tehran don't succeed in restoring Assad, because then, there'd be no hope for the Qatar line either. 

And as for Erdogan's contention that because Turkey can get gas from sources other than Russia, Moscow should "think well," the following pie chart suggests that in the current geopolitcal environment, it is actually Ankara that should think twice before adopting too brazen a position...

FATCA: The Dumbest Law In History Just Went To The Next Level

Zerohedge - 3 hours 49 min ago

Submitted by Simon Black via,

The Road to Ruin, as they say, is paved in good intentions.

So I suppose the road to hell is paved in the best of intentions.

And that’s how most laws often start: with the BEST of intentions. That was certainly the case when Barack Obama signed the HIRE Act into law in 2011.

It was intended to spur job growth in the Land of the Free while the wounds of the financial crisis were still fresh.

But always remember the rule of thumb with legislation: the more noble-sounding the name of a law, the more destructive its consequences. The HIRE Act did not disappoint.

Deep within its bowels fell the Foreign Account Tax Compliance Act, or FATCA for short. It was a sort of ‘law within a law’, and one of the dumbest in US history.

FATCA effectively commanded every single bank on the planet to enter into an information-sharing agreement with the IRS.

(Well, not so much ‘information sharing’. More like ‘information giving’. Because the US government doesn’t share anything with anyone.)

It all started based on a phony assumption that millions of Americans were hiding trillions of dollars in secret offshore accounts. And given how broke the US government is, they wanted every penny they were entitled to.

So the plan was to turn every bank in the world into a global spy network.

Any bank that didn’t comply was threatened with a crippling 30% withholding tax on every dollar that went in, out, and through the Land of the Free.

Banks complied. And FATCA was rolled across the world.

Eventually foreign governments stepped in and negotiated government-to-government information sharing agreements.

The idea was that, instead of banks sharing information directly with the IRS, they would give all the information to their national governments, which would then hand everything over to the United States.

Essentially it created another layer of bureaucracy, with ‘FATCA departments’ now within finance ministries around the world.

The first of these government-to-government information sharing agreements, or IGAs as they are known, went into effect on the first of this month.

So FATCA truly has graduated to the next level of stupidity.

Here’s why:

Remember, the entire law was passed based on a premise that it would quickly fill the government’s empty coffers with oodles of cash.

But that hasn’t happened.

The government itself admits that over the last 5-6 years, government programs to eliminate offshore tax evasion have brought in $6.5 billion, or roughly $1 to $1.3 billion per year.

That’s not even enough to fund the annual budget for the government’s obscure ‘Corporation for National and Community Service’.

And according to the Association of Certified Financial Crime Specialists (ACFCS), an organization specializing in tax evasion, FATCA will continue to generate roughly $800 million per year in tax revenue.

Yet $800 million doesn’t even constitute a drop in the bucket anymore; it’s enough to pay about 17 hours worth of interest on the national debt.

Even if ACFCS is way off and the real amount is 10x their estimate, the funds still won’t come anywhere close to what FATCA was supposed to bring in for Uncle Sam.

But it certainly raises the question—isn’t SOME money better than NO money?

No. Not when the cost is this high.

It’s not like implementing FATCA around the world is free. Banks and governments have had to incur substantial costs to comply. And those costs are ongoing.

Think about it—dozens upon dozens of nations across the world have to go through the trouble to change their banking laws and privacy regulations. In some cases they might even have needed to amend their Constitutions or hold a referendum.

Thousands of banks have had to suffer increased costs of compliance as well.

The British government alone estimated that the cost of compliance for UK businesses would be $80 to $150 million per year. Just in one country. It’s unreal.

Now imagine those same costs in France. Spain. Germany. Japan. Etc.

The costs to foreign banks and governments start to exceed the benefit to Uncle Sam very quickly.

This basically qualifies as extortion. The US government made a bunch of threats, forcing banks and foreign governments to comply with its stupid law.

It would be a hell of a lot easier if they had just blackmailed them all into making a donation to reduce the US federal debt, instead of creating yet another bureaucracy.

Even former IRS commissioner Steven Miller stated last year to the Securities Industry and Financial Markets Association:

“I can’t even say with conviction that I’m sure, looking strictly on a cost-benefit basis, that FATCA’s. . . benefits are going to outweigh the cost.”

FATCA constitutes theft. The US government is generating a little bit of revenue and the great expense of foreign banks and governments.

(not to mention the thousands of Americans who have had to renounce their citizenship because of FATCA’s idiotic rules.)

It’s a sad to realize that the only way the US government can generate revenue is to chase boogeymen across the world and hold foreign banks and government hostage at the point of a gun.

If tax evasion in the US really were such a massive problem (which, by the way, the data shows that’s it’s not), why don’t they just attack the root cause?

The US tax code is embarrassingly antiquated. The last major revision was from the 1980s, and it doesn’t take into account globalization, the digital revolution, or anything else that’s happened in the last three decades.

Instead of violence and intimidation, why not just work to streamline the tax code and make America more competitive?

Sadly, this no longer enters the government psyche in the Land of the Free.

The Fukushima Wasteland: "Terrifying" Drone Footage Of Japan's Abandoned Nuclear Exclusion Zone

Zerohedge - 4 hours 9 min ago

While the world has had decades of opportunities to observe nature slowly reclaiming the consequences of human civilization, particularly at the site of the original nuclear disaster, Chernobyl, there has been far less media coverage for obvious reasons, of that other nuclear disaster, Fukushima, where as we reported last night, one year after giving up on its "ice wall" idea Tepco has renewed the strategy of encasing the radioactive sarcophagus in an ice wall.

It was not precisely clear why this time the idea is expected to work after it was nixed last summer.

What is clear is that something has to be done, because as renewed interest in the aftermath of the results of the 2011 disaster once again builds ahead of the 2020 Tokyo Olympics, the public is realizing just how vast the Japanese wasteland truly is.

And capturing just that, is this eerie drone overflight of the Fukushima graveyard shown in the clip below:


For those curious for more, here, courtesy of photographer Arkadiusz Podniesinski who donned protective gear to visit the "terrifying" - in his words - ghost towns of Futaba, Namie and Tomioka last month, we get an up close an personal photo essay of this generation's Chernobyl.

This is what he found: supermarket aisles strewn with packets. A school blackboard covered with notes for an unfinished lesson. Cars tangled with weeds in an unending traffic jam.

These are eerie pictures from inside the 20km exclusion zone around Fukushima nuclear plant, courtesy of Guardian.


The photographer, Arkadiusz Podniesinski, stands on one of the main streets of Futaba. The writing above him says: “Nuclear energy is the energy of a bright future.”


A street that has been taken over by nature. Four years after the catastrophe – which drove 160,000 people from their homes – much of the region is still too dangerous to enter.


The KFC Colonel and mannequins left standing in a supermarket.  “Here time has stood still, as if the accident happened yesterday,” says Podniesinski of the most-contaminated areas.


An aerial photograph of abandoned vehicles.


An aerial photograph of dump sites, taken by a drone. Contaminated radioactive topsoil from the fields has been bagged for removal and there have been efforts to clean deeper layers. To save space, the soil is stacked in layers.


A restaurant table with crockery left behind by guests. The huge task of decontaminating the area, site of the worst nuclear disaster since Chernobyl in 1986, continues. Thousands of workers move from street to street through villages, spraying and scrubbing the walls and roofs of houses.


Car bumpers overgrown with weeds. Some of the people Podniesinski spoke to doubt the official line that the area will be safe again in 30 years. “They are worried that the radioactive waste will be there for ever,” he says.


A classroom on the first floor in a school. There is still a mark below the blackboard showing the level of the tsunami wave. On the blackboard are words written by former residents, schoolchildren and workers in an attempt to keep up the morale of all of the victims, including “We can do it, Fukushima!”

Putin Calls US, Allies "Oatmeal Heads" On Syria

Zerohedge - 4 hours 28 min ago

To be sure, there are a lot of absurd things about what Washington has done and is currently doing in Syria. 

There’s the support for Turkey’s Recep Tayyip Erdogan, for instance, who has used ISIS as an excuse to wage war on his own people. Then there are the various efforts to arm and train a hodgepodge of different anti-regime rebel groups (with more embarrassing results each and every time). And just yesterday we learned that the best idea the Pentagon can come up with now is to literally paradrop “50 tons” of ammo on pallets into the middle of the desert and hope the “right” people pick it up.

Of course when it comes to absurd outcomes in Syria, it’s difficult to top the fact that at some point - and you don’t have to go full-conspiracy theory to believe this anymore - either the West or else Qatar and Saudi Arabia provided some type of assistance to ISIS, which then proceeded to metamorphose into white basketball shoe-wearing, black flag-waving, sword-wielding desert bandits hell bent on establishing a medieval caliphate. 

Having said all of that, things took an even more surreal turn late last month when, after Russia stormed in via Latakia and started bombing anti-regime targets, Washington was forced to claim that somehow, Moscow’s efforts would be detrimental to the war on terror.

To be sure, there really wasn’t much else the US could say. After all, you can’t simply come out and say “well, we need to keep ISIS around actually and we’d much rather them then Putin and Assad, so no, we’re not going to help the Russians fight terror.” The only possible spin to avoid blowing the whole charade up was to claim that somehow, The Kremlin is helping terrorists by killing them (and not in the whole 72 virgins kind of way). 

Now as we’ve said before, Putin is there (along with Iran) to shore up Assad. There’s no question about that and Moscow hasn’t been shy about saying it. But at the end of the day, when you are trying to wipe out your friend’s enemies and some of those enemies are terrorists, well then, you are fighting a war on terror by default and that’s not good for terrorists by definition. By denying this, the US is effectively arguing against a tautology which is never a good idea, and we’re running out of ways to describe the ridiculousness of it. 

Fortunately, Vladimir Putin is not running out of colorful descriptors.

Here’s Bloomberg with some amusing excerpts from a speech he gave at an annual conference organized by VTB Capital in Moscow on Tuesday:

Some of Russia’s international partners have “oatmeal in their heads” because they don’t understand clearly that its military campaign in Syria seeks to help the fight against terrorism, President Vladimir Putin said.


Russia notified the U.S. and the European Union in advance “out of respect” that it intended to begin airstrikes against Islamic State and other militants in Syria, Putin said at an annual conference organized by VTB Capital in Moscow on Tuesday. This showed Russia’s ready to cooperate on Syria, while nobody ever warned the authorities in Moscow about their operations, he said.


Putin’s colorful phrase, normally used to describe someone as confused, to characterize relations with the U.S. and its allies on Syria comes amid deep tensions over the Russian bombing campaign and cruise-missile strikes that began Sept. 30. The EU demanded on Monday that Russia stop targeting moderate groups opposed to Syrian President Bashar al-Assad. U.S. Defense Secretary Ashton Carter warned that Russia’s actions “will have consequences” and the bombing “will only inflame” Syria’s four-year civil war.


Russia “received no answer” when it asked its international partners to provide information on terrorist targets in Syria, or to say at least where its planes shouldn’t bomb, Putin said. “It’s not a joke, I’m not making any of this up,” he said.

And while the US insists on says things like this (out just hours ago):


Put makes a more logical argument. Namely that when one drops 50 tons of ammo from the sky into the most dangerous place on earth, there’s absolutely no way to know for sure where it will ultimately end up:

U.S. air drops of weapons and ammunition intended for the Syrian Free Army, which is fighting Assad’s regime, could end up in the hands of Islamic State instead, Putin said.

Yes, they might “end up in the hands of Islamic State” which we’re sure wasn’t what Washington had in mind. Oh ... wait...

*  *  *

Artist's Impression Of The First Democratic Debate

Zerohedge - 4 hours 49 min ago

The elephant donkey in the room...




There Will Be Blood – Part V

Capitalist Exploits - 4 hours 58 min ago

As the housing boom of the 2000’s minted new millionaires every second Tuesday. So, too, the shale oil boom minted wealth faster than McDonald’s mints new diabetics.

Estimates by the UND Center for Innovation Foundation in Grand Forks, are that the North Dakota shale oil boom was creating 2,000 millionaires per year. For instance, the average income in Montrail County has more than doubled since the boom started.

Taken direct from Wikipedia:

Despite the Great Recession, the oil boom resulted in enough jobs to provide North Dakota with the lowest unemployment rate in the United States. The boom has given the state of North Dakota, a state with a 2013 population of about 725,000, a billion-dollar budget surplus. North Dakota, which ranked 38th in per capita gross domestic product (GDP) in 2001, rose steadily with the Bakken boom, and now has per capita GDP 29% above the national average.

I wonder how many North Dakotans have any idea the effect low oil prices are going exert on their living standards, freshly elevated house prices, employment stats, and government revenues.

We’re all about to find out. Here is the last piece in our 5-part series by Harris Kupperman exploring what this means for the fracking industry, oil in general, and the one topic nobody is paying much attention to: the petrodollar.



Date: 27 September 2015
Subject: There Will Be Blood – Part V

Starting at the end of 2014, I wrote a number of pieces detailing how QE was facilitating the production of certain real assets like oil where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that were offered on the debt. The overriding theme of these pieces was that the eventual crack-up in the energy sector would precipitate a crisis that was much larger than the great subprime crisis of last decade as waves of shale defaults would serve as the catalyst for investors to stop reaching for yield and once again try to understand what exactly they owned.

Fast forward 9 months from the last piece and most of these shale producers are mere shells of themselves. If you got out of the way—good for you. Amazingly, these companies can still find creative ways to tap the debt markets, stay alive and flood the market with oil. Eventually, most won’t make it and I believe that the ultimate global debt write-off is in the hundreds of billions of dollars—maybe even a trillion depending on which larger players stumble. That doesn’t even include the service companies or the employees who have their own consumer and mortgage debt.

I believe that shale producers are the “sub-prime” of this decade. As they vaporize hundreds of billions in investor capital, thus far, there has been a collective shrug as everyone ignores the obvious – until suddenly it begins to matter. By way of timelines, I think we are now getting to the early summer of 2008 – suddenly the smart people are beginning to realize that something is wrong. Credit spreads are the life-line of the global financial world. They’re screaming danger. I think the equity markets are about to listen.

High-yield – 10-year spread is blowing out

Then again, a few hundred billion is a rounding error in our QE world. There is a much bigger animal and no one is talking about it yet – the petrodollar.

Roughly defined, petrodollars are the dollars earned by oil exporting countries that are either spent on goods or more often tucked away in central bank war chests or sovereign wealth funds to be invested. I’ve read dozens of research reports on the topic and depending on how its calculated, this flow of capital has averaged between $500 billion and $1 trillion per year for most of the past decade. This is money that has been going into financial assets around the world – mainly in the US. This flow of reinvested capital is now effectively shut off. Since many of these countries are now running huge budget deficits, it seems only natural that if oil stays at these prices, this flow of capital will go in reverse as countries are forced to sell foreign assets to cover these deficits.

Over the past year, the carnage in the emerging markets has been severe. Barring another dose of QE, I think this carnage is about to come to the more developed world as the petrodollar flow unwinds and two decades of central bank inspired lunacy erupts.


We agree with Harris, and not coincidentally the petrodollar unwind forms a part of the global USD carry trade unwind I’ve been harping on about recently.

Capitalist Exploits subscribers will receive a free report on 3 actionable trades in the oil and gas sector later this week. Leave us your email address here to get the report.

- Chris

“So, ladies and gentlemen… if I say I’m an oil man you will agree. You have a great chance here, but bear in mind, you can lose it all if you’re not careful.” – Daniel Day-Lewis, There Will Be Blood

The post There Will Be Blood – Part V appeared first on Capitalist Exploits - Frontier Markets Investing, Private Equity and IPO's.

Analysts Try To Predict Future Earnings, Comedy Ensues

Zerohedge - 5 hours 12 min ago

While everyone's attention is focused on the earnings deluge set to be unleashed in the third quarter (and if the handful of companies reporting so far is any indication, this may be one of those quarters when companies underperform already drastically lowered EPS estimates, which at last check are set to tumble -5.5% Y/Y according to consensus), the big surprise is what has quietly taken place to Q4 consensus estimates.

First, a reminder of where Q3 stands from FactSet.

At the start of the peak weeks of the Q3 2015 earnings season, the blended earnings decline for the third quarter stands at -5.5%. Factoring in the average improvement in earnings growth during a typical earnings season due to upside earnings surprises (see page 2 for more details), it still appears likely the S&P 500 will report a year-over-year decline in earnings for the third quarter. If the index does report a year-over-year decline in earnings for the third quarter, it will mark the first time the index has reported two consecutive quarters of year-over-year declines in earnings since Q2 2009 and Q3 2009.

Actually, make that three quarters in a row, because as of this past week, EPS in the fourth quarter, which on June 30 were triumphantly expected to post a solid 4.3% rebound, went from +0.2% to negative 0.4%.

Looking at the current quarter (Q4 2015), what are analyst expectations for year-over-year earnings? Do analysts believe earnings will decline in the fourth quarter also? The answer is yes. This past week marked a change in the aggregate expectations of analysts from flat year-over-year earnings (0%) for Q4 2015 to a decline in year-over-year earnings for Q4 2015. However, expectations for earnings growth for Q4 2015 have been falling not only over the past few weeks, but also over the past few months. On June 30, the estimated earnings growth rate for Q4 2015 was 4.3%. By September 30, the estimated growth rate had declined to 0.2%. Today, it stands at -0.4%.

The following chart shows the trajectory of Q4 consensus EPS growth, or rather as of October 9 when it just turned negative, decline:


This is nothing more than the well-documented sellside overoptimism, aka the spread between the "soft dollars" optimism (because banks are only paid for their optimism never for their skepticism), and reality. It is also shown in the "fishhook" chart below from Deutsche Bank.


This is turn takes us back to a post we did three weeks ago, in which we laid out the truth about S&P earnings which few have dared to mention, namely that there is now "no earnings growth for 7 quarters (with a revenue recession on top)"

It is time to revise this chart because as a result of the decline in both Q4 2015 and inevitable drop in Q1 2016 EPS, we are on the verge of having not seven but eight quarters, or two straight years without an increase in S&P earnings - something that has never happened outside of a recession!

So what is the good news? Well, in order to save their optimistic year-end price targets if not so much for 2015 then for 2016, analysts have to predict what EPS will be in the 4 quarters of 2016.

This is what FactSet says: "it is interesting to note that analysts in aggregate do expect earnings growth to return for all
quarters in 2016. Please see the chart on page 5 for more details."

That's right, after two years of stagnant earnings, and three straight quarters of declining quarterly EPS, the sellside community now expects a dramatic surge in 2016 EPS, which after rising 4.9% and 7% in Q1 and Q2, is expected to literally soar in Q3 and Q4 by 14.7% and 14.1%


While we appreciate Factset's wry (or dry) humor, we would replace "interesting" in the bolded sentence above with "absolutely comic", because as DB further notes, the only way earnings soar as much as they do in 2016 is for the energy sector to do a full U-turn, which in turn will only happen if oil manages to storm higher from its current price in the mid-$40s to a price double that, somewhere north of $80.

Then again, if and when all central banks engage in the final act of monetary desperation - a necessary and sufficient condition for a commodity price supernova - it is quite possible that oil will in fact rise to $80, maybe even $800. However, for anyone using an "all else equal" approach to forecasting, we would suggest that expecting a 14% annual increase in earnings in the second half of 2015 is just not going to happen. In fact, just the opposite is likely to happen considering the biggest, and long overdue, GDP-crushing inventory liquidation/repricing in US history looming just around the corner.

Source: Factset

Now What: How Should One Trade In A World Where "Most Indicators Have Lost Their Informational Value"

Zerohedge - 5 hours 21 min ago

A market which trades day to day on historic "whiplashes", record short squeezes, broken trendlines, and of course, $13 trillion in excess liquidity, got you shaking your head (and burning old Finance 101 textbooks)? Don't despair: here is Macquarie with a guide of how to trade in world where "most leading indicators have lost their informational value."

From Equities - Irrational Exuberance, by Victor Shvets of Macquarie

In our latest commentary we ask whether equities are appropriately assessing risks or whether higher FICC volatilities are more rational. Both cannot be right. Are equities reflecting fundamentals? Most leading and trade indicators seem to be highlighting that despite aggressive monetary easing by 20+ central banks, deflationary pressures remain strong and growth rates in both DMs and EMs are rapidly slowing. In response, FICC are signalling an elevated level of risk. However, equity investors seem to be assuming maintenance of ‘goldilocks’: low rates & ample liquidity; slow (but steady) growth and low (but positive) inflation.

Who is right? We argued here that most leading indicators have lost their informational value as private sector no longer has any LT visibility, and hence  survey-based responses frequently send misleading signals. Given that FICC investors tend to be intensive macro data users, they are highly susceptible to whiplashes of false signals. As long as public sector continues to dominate macro outcomes, FICC investors are at the mercy of unpredictable shifts, driven by CBs rather than fundamental drivers. Therefore, our traditional assumption— that whenever there is a conflict between FICC and equities, the former is almost always right— might no longer hold, as FICC investors are now just as ‘blind’ as equity investors. Hence, equities just might be right.

However, we are concerned on two counts: (a) global economy continues to reside on a de-facto US$ standard and the US is not generating enough US$ to enable continuing global leveraging (absent strong recovery or QE4, supply of US$ is falling at ~5% clip); and (b) efficacy of conventional monetary policies seem to be largely exhausted. As global velocity of money declines, incremental QEs required to grow liquidity are on an ever increasing scale (~US$1.5tr+ in ’16 and escalating to infinity). Hence, there is a need to re-assess nature of QEs. We doubt that the alternative of CBs abandoning desire to regulate and ‘smooth cycles” and letting deflationary business cycle to reset itself is on the cards.

If conventional QEs lost potency and aggravate global deflationary pressures, why do equities assume that lack of tightening and further QEs would guide economies towards ‘goldilocks’? We believe that it is a simple ‘Pavlovian reflex’. In the past, this relationship worked because QEs were generally successful in temporarily reducing deflationary pressures. However, short of massive rise in monetary stimulus, it seems that incremental changes would no longer be able to achieve such an outcome. Are we ready for more extreme policies? The next stage is likely to be CBs directly funding fiscal spending, investment and consumption. However, to accept such a radical shift requires ‘accidents’ and a severe slowdown. Over 12-18 months, chances of both are high but low over ST.

Hence in the ST (3-6 months) we anticipate neither aggressive QEs (with at best limited efficacy) nor extreme unconventional policies. Therefore, as investors progress into ’16, supply of US$ is likely to continue contracting, deflating global demand and constraining liquidity. This would lead to regular bouts of volatility rather than goldilocks and could easily reverse current equity euphoria. Hence, we are reluctant to back weaker EMs, and continue to play ‘safe’ by emphasizing countries with trapped local liquidity, some flexibility of monetary & fiscal policies and countries that do not excessively rely on commodities.


Subscribe to No Time 4 Bull aggregator

Join Forum

To prevent automated spam submissions leave this field empty.

Best of the Web