Radio Show Newsletter
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: Does the chaos embroiling equity markets have an obvious precedent that can guide investors on how it plays out? While the Crash of ’87 and 2008 financial crisis have been name checked, a more relevant example may be 1998, the first test of the internet bubble. It was a period in the market that has some eerie parallels to today. Stocks were in the eighth year of a giant bull run that had relentlessly expanded valuations. The Federal Reserve had just begun a tightening cycle. And behind the scenes, sophisticated speculators were getting into trouble.
While drama played out rapidly, its depth may be a lesson for investors wondering how bad things can get in such an environment. The S&P 500 Index violently plunged 19 percent in a matter of weeks, from a high on July 17, 1998, through the last day of August. Yet, the decline was all but forgotten two months later. “In both instances the market was acting giddy, euphoric,” said Howard Ward, chief investment officer of growth equities at Gabelli Funds.
“A highly speculative market then, versus a bitcoin craze now. Individual investors entering the market late only to get crushed when the it sinks. Stocks rising exponentially when there were few factors justifying the advance.” Also: quants. While today’s upheaval is being linked to funds selling futures that fluctuate with market volatility, the travails of 1998 are forever tied to the hedge fund Long-Term Capital Management, whose soured investments in over-the-counter derivatives required a $3.5 billion bailout brokered by the Federal Reserve. Read more here-https://bloom.bg/2FStkSB
-CHART OF THE WEEK: Stocks May Tumble 10%, But Hang In There, $141 Billion Fund Says. Equity investors are in for a further stomach-churning down-draft, but it will pay off to stay the course, according to AMP Capital Investors Ltd. “It’s likely the pullback has further to go as investors adjust to more Fed tightening than currently assumed,” said Shane Oliver, Sydney-based global investment strategist at AMP Capital, which oversees about A$179 billion ($141 billion). “The pullback is likely to be just an overdue correction, with say a 10 percent or so fall, rather than a severe bear market.” Read more here-https://bloom.bg/2BIrllD
-CHART OF THE WEEK: Buying the Dip Works Nicely, a 30-Year History of Routs Shows. As the dust settles for now after the turmoil of the last few days, a chorus of buy-the-dip calls from fund managers and strategists is still ringing in equity investors’ ears. History suggests they have a point. An analysis by Schroders Plc of the 10 biggest one-day stock declines in the past 30 years showed the U.S. stock market returned about 25 percent on average in the following 12 months. For the following five-year period, average annual total returns were about 14 percent, according to the calculations. Read more here-https://bloom.bg/2ELGjG4
-CHART OF THE WEEK: Strategist Who Warned on VIX Says Forget About Buying the Dip. Back in November, he warned about the risks of overcrowded short positions on volatility. Now he says don’t even think about buying the dip in U.S. stocks. Societe Generale SA’s Roland Kaloyan sees rising bond yields choking the U.S. bull market, betting that the S&P 500 will end the year at 2,500 points, some 13 percent lower than the benchmark’s record high hit in January. “Equity investors have had an amazing time over the past four-five years,” Kaloyan, an equity strategist at SocGen, said in an interview. “But now, the surge in bond yields is reaching the pain threshold for equities.” Read more here-https://bloom.bg/2ENRBto
-CHART OF THE WEEK: Nomura Sorry for VIX Note Crash That Burned Retail Investors. Nomura Holdings Inc. issued an apology after investors in a $300 million product betting on low volatility were all but wiped out during this week’s stock-market turmoil. Japan’s biggest brokerage said Wednesday that it has received inquiries from individual investors after its decision to redeem the exchange-traded notes at a 96 percent discount. “We sincerely apologize for causing significant difficulties to investors,” its Nomura Europe Finance unit said in a statement a day earlier.
Nomura’s Next Notes S&P500 VIX Short-Term Futures Inverse Daily Excess Return Index ETN involved a bet against stock-market gyrations by moving in the opposite direction to a gauge of volatility. Its early redemption the first of its kind in Japan was triggered after the notes lost more than 80 percent of their value amid the global equity-market selloff. “This is a listed product, and we believe it can be bought by both individual and institutional investors,” Nomura said in an emailed statement. It declined to comment on any positions it took in the product or any impact of its demise on earnings. Read more here-https://bloom.bg/2nQCKGy
-CHART OF THE WEEK: S&P Warns High Corporate Debt Could Trigger Next Default Cycle. The number of defaults by heavily indebted corporates could rise significantly amid tightening credit conditions, according to S&P Global Ratings. Easy liquidity and underwriting together with low interest rates have contributed to a spike in the number of highly leveraged firms, creating a risk masked by relatively low default rates. Removing the “easy money punch bowl” could trigger the next default cycle since high corporate debt levels have increased the sensitivity of borrowers to elevated financing costs, the ratings agency said in a Feb. 5 report. Read more here-https://bloom.bg/2nKOCdW
-CHART OF THE WEEK: Get Ready for Most Cryptocurrencies to Hit Zero, Goldman Says. The tumble in cryptocurrencies that erased nearly $500 billion of market value over the past month could get a lot worse, according to Goldman Sachs Group Inc.’s global head of investment research. Most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they’re replaced by a small set of future competitors, Goldman’s Steve Strongin said in a report dated Feb. 5. While he didn’t posit a timeframe for losses in existing coins, he said recent price swings indicated a bubble and that the tendency for different tokens to move in lockstep wasn’t rational for a “few-winners-take-most” market. “The high correlation between the different cryptocurrencies worries me,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.” Read more here-https://bloom.bg/2GXgt2S
-CHART OF THE WEEK: Bitcoin Miners Fried in Game of Chicken. As prices plunge, most are losing money. They’re all headed for the cliff unless some pull out. Bitcoin miners who’ve decided to stay in the game amid plunging prices may soon find that the well has run dry. A 70 percent price drop since the heady days of mid-December has cut profitability to the bone. With the cryptocurrency hitting $6,000 on Tuesday, only the biggest and most efficient can stay above water, but even these are balancing on a knife edge, according to a Gadfly analysis.
Unless you’re an outfit running the fastest rigs bought at wholesale prices 67 percent of all mining power is in the hands of four pools chances are you’re losing money. The arms race among participants has brought 40 percent more mining power online since Bitcoin prices went above $19,000 on Dec. 18. That’s resulted in the rebalancing system built into the digital currency making it 51 percent more difficult to complete a block, according to data from Blockchain.info. Miners forced to work ever harder for each Bitcoin have shrugged off this escalating requirement for computational power up 18-fold in two years because a 21-fold price increase over the same period made the cost worth the investment. Read more here-https://bloom.bg/2FUEYMB
-The Dow Jones Industrial Average fell nearly 1,600 points at its lows on Monday, after a period of selling accelerated sharply heading into the close of the session. Amplifying the slump was computer-programmed trade set to dump shares at certain levels. According to traders, the Dow DJIA, +2.19% was set to trigger trades once it fell below 25,000 and 24,000, for example, and 2,700 for the S&P 500 SPX, +1.66% The S&P 500 finished the session off 113 points, or 3.9% at 2,648, the Nasdaq Composite Index COMP, +2.01% ended down 273 points, or 3.8%, at 6.967. The Dow, meanwhile, shed as much as 1,597 points at its low, and closed out the session 1,175 points, or 4.6%, down at 24,345. Marketwatch
-Here’s how much the stock market would have to drop to wipe out Donald Trump’s stock rally. Trump still has a large cushion before the Dow’s postelection gains disappear. The Dow closed at 18,332.74 on Nov. 8, 2016, Election Day, which means there are 6,013 points to go before the Trump rally is gone. Bloomberg
-Treasury Secretary Steven Mnuchin checked in with Wall Street investors Tuesday morning following Monday’s stock market plunge but said he’s “not overly concerned” about a short-term selloff. Markets are “functioning very well,” the drop didn’t pose any financial stability concerns, and the Trump administration’s policies “are very positive for long-term economic growth,” Mnuchin said at a hearing of the House Financial Services Committee. “You’ve seen a normal market correction, although large,” Mnuchin said. “There’s a disconnect in the short-term; markets move in both directions.” Bloomberg
-End of a Bull Market, or Nowhere Near? Making the Case for Both. It’s safe to say 2018’s euphoric stage is over. Almost $3 trillion was erased from equity values in six days, volatility surged, and the best start to a year in three decades was wiped out. Now what? Buy, sell or hold simple choices, never easy. Is the bull run too old? Should I buy the dip? What about valuations? Following is a breakdown of the bull and bear case for five different topics, from earnings to sentiment to bond yields.
The Bear Case: Equities are pricey. Just this weekend, former Fed Chair Janet Yellen said that U.S. stocks are “high,” with price-earnings ratios near the upper end of their historical ranges. S&P 500 companies trade for nearly 23 times profit, a ratio that has only been matched once since the dot-com bubble. The last time this kind of level was seen was in the aftermath of the financial crisis, where earnings were essentially nonexistant.
The Bull Case: Earnings are looking good really good. The market is in the midst of one of the best rounds of corporate earnings upgrades for S&P 500 companies on record. In sum, estimates for 2018 profits have increased by more than $10 a share since mid-December, a pace four times faster than any stretch seen since at least 2012, according to data compiled by Bloomberg. If you measure using those estimates, valuations don’t look as lofty factor in 2018 estimates and stocks trade at a multiple of 17.7. If you extend to 2019 forecasts, the price-earnings ratio comes down to a healthy 16. Bloomberg
-Peter Garnry said two weeks ago that global stocks were headed for a correction in the second half of the first quarter. While the head of equity strategy at Saxo Bank didn’t get the timing exactly, his alarm bells on the run-up in equity markets were on point. Now, Garnry says the declines are likely to be short-lived as U.S. 10-year Treasury yields haven’t reached a worrying level. “We believe this is a healthy correction in equity markets but also likely short-lived as the higher US 10-year yield is still not in the danger zone,” Garnry said in an e-mail. “That area is more likely in the 3.5-4.0 percent range.” Still, Garnry says it’s too early to predict a bear market. “After the correction, equity investors will likely buy into the inflation story and bid up equities once more, which is a classical late-cycle behavior which we last time saw in 2007,” he said, adding that the decline in global equities could extend to about 7 to 10 percent. Bloomberg
-Investors have finally detected the whiff of inflation. Whether it lingers is the debate now underway as stocks and bonds slide worldwide amid concern that prices are set to accelerate after their post-crisis lull. Though inflation still looks under control in most major economies, pressure is building and there are legitimate reasons to say its return is much nearer than for some time. That could force the Federal Reserve and fellow central banks to tighten monetary policy more aggressively than anticipated, meaning a sharper end to the era of easy money that’s swaddled markets for years. “There is clearly a worry about inflation and there is a follow-over to worrying about interest rates and bond yields,” James Bevan, chief investment officer at CCLA Investment Management, told Bloomberg Television. Bloomberg
–Risk parity funds. Volatility-targeting programs. Statistical arbitrage. Sometimes the U.S. stock market seems like a giant science project, one that can quickly turn hazardous for its human inhabitants. You didn’t need an engineering degree to tell something was amiss Monday. While it’s impossible to say for sure what was at work when the Dow Jones Industrial Average fell as much as 1,597 points, the worst part of the downdraft felt to many like the machines run amok. For 15 harrowing minutes just after 3 p.m. in New York a deluge of sell orders came so fast that it seemed like nothing breathing could’ve been responsible. “We are proactively calling up our clients and discussing that a 1,600-point intraday drop is due more to algorithms and high-frequency quant trading than macro events or humans running swiftly to the nearest fire exit,” said Jon Ulin, of Ulin & Co. Wealth Management in Boca Raton, Fla., in an email. Bloomberg
-Big money managers are surveying the wreckage in global stocks, and many like what they see. Even as the rout claimed more markets in Europe and Asia after the Dow Jones Industrial Average posted its worst points loss ever, investors at Barclays Plc, Credit Suisse Group AG and Allianz Global Investors sought buying opportunities in cheaper stocks underpinned by rebounding global growth. Many fund managers said a reality check for elevated valuations was overdue even as optimism for expanding profits and economic growth prevails. Mindful those tailwinds remain, here are some money managers ready to ‘buy the dip.’
“Global equities did not experience any material weakness for nearly two years, valuations have become stretched and technical, positioning and sentiment indicators all flashed red in recent weeks. ” “The unwinding of this extreme bullishness could have a bit more to go in the near term, but our view is that the medium term fundamental backdrop remains supportive and that one should indeed use the recent dip as buying opportunity. We think Eurozone and Japan offer the best risk reward, given their more attractive valuations and positive operating leverage.” Bloomberg
-Fidelity Investments had intermittent technology issues with its website a day after robo-advisers struggled in the market rout. Fidelity customers faced some difficulties accessing the firm’s home page on Tuesday. By early afternoon, the issues were resolved, said Michael Aalto, a company spokesman. The websites of two of the country’s biggest robo-advisers Wealthfront Inc. and Betterment LLC crashed on Monday as the S&P 500 Index sank. Complaints quickly spread across Reddit and other internet sites from people who had trouble logging onto their accounts. “Really?” wrote @jlpatel23 after he received a message from Wealthfront saying its site was down. The glitches at the robo-advisers represent a setback for a niche of the financial market industry that has been booming as people have become more comfortable making investment decisions without speaking to human advisers. Vanguard Group and Charles Schwab Corp. reported outages on Monday and said those didn’t recur today. Bloomberg
-Equity markets could fall as much as 20 percent this year, Blackstone Group LP President Tony James said. “Every historic norm says that stocks are very, very fully valued,” James said Monday in an interview on CNBC, adding that the market decline could be 10 percent to 20 percent. Global stocks on Monday extended the biggest selloff since 2016, with U.S. shares continuing last week’s decline and European and Asian equities falling. The slump was sparked by U.S. wage data Friday that pointed to quickening inflation, which would lead to higher rates and therefore rising borrowing costs for companies. The U.S. economy has been picking up for a while and further stimulus from recent tax cuts may not have been necessary, James said. “If you’re worried about interest rates and inflation, the stimulus could be the thing that tips us over into a rate spike,” the billionaire said. Bloomberg
-Outgoing Federal Reserve Chair Janet Yellen said U.S. stocks and commercial real estate prices are elevated but stopped short of saying those markets are in a bubble. “Well, I don’t want to say too high. But I do want to say high,” Yellen said on CBS’s “Sunday Morning” in an interview recorded Friday as she prepared to leave the central bank. “Price-earnings ratios are near the high end of their historical ranges.” Commercial real estate prices are now “quite high relative to rents,” Yellen said. “Now, is that a bubble or is it too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.” Yellen, 71, stepped down as Fed chief on Saturday after one term, after President Donald Trump opted to replace her with Republican Jerome Powell, who’s been a Fed governor since 2012. Bloomberg
-Jeffrey Gundlach, chief executive of Doubleline Capital, said Wednesday that the “low rate-low volatility” environment went on for so long that now “the unwind will be turbulent and not over in a couple of days.” Gundlach, who is known as the Wall Street bond king, told Reuters that bitcoin was the “lead horse” of risk assets and its recent plunge has had a cascading effect on other risk assets. Reuters
-Federal Reserve Chairman Jerome Powell, minutes after being sworn in as the central bank’s 16th leader, pledged to support continued growth and price stability, while emphasizing a commitment to better communication with the public. “As I begin my term, I want to stress my commitment to explaining what we’re doing and why we are doing it,” Powell said in a video message released Monday. Powell becomes a steward of the U.S. economy at a particularly important juncture just as growth is picking up, and with unemployment and inflation at near historical lows. “Through our decisions on monetary policy, we will support continued economic growth, a healthy job market, and price stability,” he said. Powell, 65, also said the Fed would continue to remain “vigilant” in guarding financial stability while working to make regulation “efficient as well as effective.” Bloomberg
-Banks are closing branches at the fastest pace in decades, as they leave less profitable regions and fewer customers use tellers for routine transactions. The number of branches in the U.S. shrank by more than 1,700 in the 12 months ended in June 2017, the biggest decline on record, according to a Wall Street Journal analysis of federal data. Branch numbers fell again in the second half of 2017, according to related data submitted to bank regulators and reviewed by the Journal. That would add to the thousands of locations closed following the financial crisis, and is the longest stretch of closures since the Great Depression.
Many of the closings were in big cities and surrounding suburbs, where branches were consolidated largely because of falling foot traffic. Others were in rural areas, where some large regional lenders are leaving town altogether. While banks battered during the financial crisis such as Citigroup Inc. and Bank of America Corp. BAC -5.29% started cutting branches years ago, regional banks have only accelerated their closures more recently. From mid-2012 to mid-2017, Capital One Financial Corp. cut 32% of its branches, SunTrust Banks Inc. 22% and Regions Financial Corp. 12%. For all three, the sharpest cuts came in the most recent 12-month period. WSJ
-Economy to grow at 5.4% rate in first quarter, Atlanta Fed tracker shows. The Atlanta Fed updated its rolling look at the U.S. economy, projecting that GDP would grow 5.4 percent in the first quarter. If the forecast holds, it would be the strongest quarter since the economic recovery began and would more than double the typical annualized growth during the period. CNBC
-The U.S. government sees nationwide oil production jumping above 11 million barrels a day much quicker than anticipated. After oil output already topped 10 million barrels a day back in November, output will climb above the 11 million mark this November, the Energy Information Administration said in its monthly Short-Term Energy Outlook on Tuesday. It previously forecast production above that level in November 2019. Nationwide output will average 10.59 million this year and 11.18 million next year, up from prior forecasts of 10.27 million and 10.85 million, according to the EIA. With West Texas Intermediate crude holding above $60 a barrel since late last year, the prospect of pumping in this price environment is seen enticing drillers to pick up the pace.
The U.S. oil rig count posted the biggest two-week gain since June, according to the latest Baker Hughes data. WTI crude will average $58.28 a barrel this year, the EIA said, up from last month’s estimate of $55.33, and $57.51 in 2019, higher than $57.43. The global benchmark Brent is forecast to average $62.39 in 2018, up from $59.74, and $61.51 in 2019 versus $61.43. “EIA’s forecast expects Brent crude oil prices to be in the $62 per barrel range in 2018 and 2019. That’s down a bit from current levels, as strong U.S. production growth is expected to help moderate global prices,” Dr. Linda Capuano, administrator of the U.S. Energy Information Administration, said in a statement. Bloomberg
-The U.S. trade deficit widened to the biggest monthly and annual levels since the last recession, underscoring the inherent friction in President Donald Trump’s goal of narrowing the gap while enjoying faster economic growth. The deficit increased 5.3 percent in December to a larger-than- expected $53.1 billion, the widest since October 2008, as imports outpaced exports, Commerce Department data showed Tuesday. For all of 2017, the goods-and-services gap grew 12 percent to $566 billion, the biggest since 2008. The trend may extend into this year: Solid consumer spending and business investment assuming they hold up amid the recent stock-market rout will fuel demand for foreign-made merchandise. While improving overseas growth and a weaker dollar bode well for exports, Trump’s efforts to seek more favorable terms with U.S. trading partners remain a work in progress, and his tax-cut legislation may cause the deficit to widen further. Bloomberg
-There is a “strong case” for authorities to rein in digital currencies because of their links to the established financial system, Bank for International Settlements General Manager Agustin Carstens said. In his first major public speech as head of the Basel, Switzerland-based institution, Carstens argued that central banks along with finance ministries, tax offices and financial market regulators should police the “digital frontier.” He said they must ensure a level playing field and functioning payment systems, and safeguard the “real value” of money.
The value of cryptocurrencies soared in 2017 before slumping, with Bitcoin losing two-thirds of its value since mid-December. “Bitcoin is not functional as a means of payment, but it relies on the oxygen provided by the connection to standard means of payments and trading apps that link users to conventional bank accounts,” Carstens said in Frankfurt on Tuesday. “If the only ‘business case’ is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.” Bloomberg
–VersaBank Inc., a tiny Canadian lender led by a tech-savvy CEO with a penchant for planes and classic motorcycles, is building a virtual safety deposit box for cryptocurrencies and other digital assets. The firm is taking the lead in a global banking industry that’s been reluctant to venture into most things crypto. The London, Ontario-based bank plans to have its digital vault ready by June and offer the service to global customers. “We’re using what banks are all about safety and security only what we’re doing now is saying that physical box in the basement is getting obsolete,” David Taylor, chief executive officer of Canada’s smallest bank by assets, said in interview at Bloomberg’s Toronto office. “Most people’s really valuable assets are contained in some sort of digital format, whether it be a deed or a contract or a cryptocurrency.” The move underscores a paradox of Canada’s financial system, which is dominated by six large lenders. While its banks are regularly regarded as among the world’s soundest, it’s also home to a boisterous junior stock market where new trends from blockchain to marijuana can quickly captivate investors. Bloomberg
-The bottom line is global investors are radically underinvested in gold today. Years of relentless stock-market rallying to endless new record highs has left prudent portfolio diversification with counter-moving gold deeply out of favor. But the same central banks that fueled this extraordinary stock bull are now reversing to massive and unprecedented tightening this year, which will inevitably force stock markets to roll over. As stocks sell off in what is almost certain to become the long-overdue next major bear, gold investment demand will make a glorious renaissance. Investors will flock back to gold to stabilize their bleeding stock-heavy portfolios, catapulting its price much higher. It will likely take years of gold investment buying to restore overall gold portfolio allocations to reasonable historic norms. That’s super-bullish for gold. Adam Hamilton
-“Virtually no investors study history and the few who do always think it is different today. The most important lesson is that people never learn. If they did, they wouldn’t be invested in a stock market that on any criteria is now at a bubble extreme. And they wouldn’t be invested in a global debt market which has grown exponentially in recent decades and which will become worthless in the next few years as debtors default. Nor would anyone hold paper money, which is down 97-99% in the last 100 years, and which is guaranteed to soon fall the final bit to take the value to zero. Egon von Greyerz
-Prices here are doubling every few weeks, confounding cash-strapped Venezuelans who are scrambling to find a way to pay for basic transactions. A Jesuit priest, Alfredo Infante, has turned to a novel formula to keep up with skyrocketing costs: He meticulously tracks the price of the humble egg. Six months ago, donations from one Sunday mass could buy 30 eggs for church events, he said. Now, he needs more than 50 Sundays to buy the same number of eggs.
“How is anyone supposed to make a budget around here?” said Father Infante, throwing up his arms in frustration as he sat below a painting of Christ’s Last Supper. Such is the ordeal in a country stricken with hyperinflation and a government so flummoxed on how to fix the distortions of its crumbling economy that it’s resorting to introducing what it says is a bitcoin-like cryptocurrency. The “petro” would eclipse the near worthless “strong bolivar,” which has lost 98% of its value against the dollar in the past year. The problem is that in a country as broke as Venezuela, the government can’t print enough bills or pay the hefty fees for commercial printers to supply them.
Paying with plastic? Credit-card readers seldom work. Things are expected to get only worse this year. The International Monetary Fund estimates an economic contraction of 15%, which means that by the end of 2018 the economy will be half of what it was in 2013. And inflation will hit 13,000%. Following in the footsteps of Brazil, a slew of post-Soviet countries and, most recently, Zimbabwe, Venezuela has become the 57th recorded case of hyperinflation, according to Steve Hanke, a Johns Hopkins University economics professor. WSJ
-A nasty flu season means workers are staying home, and it’s costing employers a bundle. Businesses can expect to take at hit of at least $15.4 billion in lost productivity due to this year’s flu season, according to a study released Friday by outplacement firm Challenger, Gray & Christmas Inc. Flu activity is now widespread in 48 states and Puerto Rico, according to the CDC’s most recent weekly report. This year’s season is especially bad because the flu vaccine isn’t working well to combat the predominant strain, H3N2. The CDC predicts that 18 million employed adults will miss four workdays due to the flu. If those employees are making the average hourly wage of $26.63, employers could be out more than $15.4 billion 64% more than Challenger estimated it would cost businesses last month. In January, the firm estimated that the flu season could cost businesses $9.4 billion dollars in lost productivity. This flu season has already killed at least 53 children in the United States, according to the CDC. CNNMoney
-Icahn: The market will one day ‘implode’ because of these wacky funds using so much leverage. There are too many exotic, leveraged products and one day these securities are going to blow up the market, Carl Icahn tells CNBC. The billionaire investor says, “The market itself is way over-leveraged,” and at some point could “implode.” But for now, he believes, “This thing will probably bounce back.” Billionaire Carl Icahn told CNBC on Tuesday there are too many exotic, leveraged products for investors to trade, and one day these securities are going to blow up the market.
The market is a “casino on steroids” with all these exchange-traded funds and exchange-traded notes, he said. These funds, especially the leveraged ones, are the “fault lines” that will eventually lead to an earthquake on Wall Street, he said. “These are just the beginnings of a rumbling.” The latest example is an obscure security, designed to be a bet on a calm market, that’s being blamed for causing an influx of selling in recent days. The VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV) blew up overnight as investors were forced to sell when the market went haywire. As a result, Credit Suisse on Tuesday said as of Feb. 20, it will end trading for its XIV, which was supposed to give the opposite return of the Cboe Volatility Index (VIX), often referred to as the market’s fear gauge. Read more here-http://cnb.cx/2E81Mbl
-Inflation Is About to Appear ‘With a Vengeance,’ Paul Tudor Jones Says. Paul Tudor Jones said inflation is about to appear “with a vengeance” and may force the new Federal Reserve chair to accelerate interest-rate hikes. The hedge fund manager said policy has focused on a “low inflation problem” and years of near-zero rates amid economic expansion will have “painful” consequences. Policy makers should have been more aggressive in tightening policy and “rejecting the fiscal impropriety associated with this most recent tax cut,” he said. “We are replaying an age-old storyline of financial bubbles that has been played many times before,” Jones, founder of Tudor Investment Corp., wrote in a Feb. 2 letter to clients. “This market’s current temperament feels so much like either Japan in 1989 or the U.S. in 1999.
And the events that have transpired so far this January make me feel more convinced than ever of this repeating history.” Jerome Powell was sworn in Monday as chairman of the Fed, inheriting a U.S. economy in its third-longest expansion on record, with unemployment and inflation near historically low levels. U.S. stocks have tumbled amid concern that quickening inflation will force interest rates higher. Jones, in the 10-page letter seen by Bloomberg, hinted at a parallel between Powell and former Bank of Japan Governor Yasushi Mieno, who took to the helm in December 1989 amid a boom driven by speculative investment in land and stocks. Within a week, he began raising interest rates. Mieno “was ultimately blamed for pricking a bubble over which he had no control,” Jones said.
“While the messenger always gets the blame, the real fault lies at the feet of the policymakers of the late 1980s who allowed systemic imbalances to build up in the Japanese stock and real estate markets.” When President Trump talked about tax reform during last week’s State of the Union address, Jones said, he didn’t mention that Treasury auctions will increase this year from the current projection of $583 billion to almost $1 trillion. “It is incredible that at full employment we have passed a tax cut that will push our deficit to 5 percent of GDP,” Jones said. “Can you imagine what will happen to the deficit and debt in the inevitable downturn? This is what the dollar is sensing.” Read more here-https://bloom.bg/2ELUxH5
-Toronto Home Sales Plunge Under New Lending Rules. Toronto home sales tumbled in the first month of 2018, as tougher mortgage qualification rules came into play and borrowing costs rose. Sales in Canada’s biggest city fell 22 percent to 4,019 units from a year earlier, according to data released Tuesday by the Toronto Real Estate Board. It was the weakest month of sales for January since 2009. The average price of a home sold in Toronto was C$736,783 ($587,968), down 4.1 percent from January 2017, though little changed from December.
Toronto’s once-hot housing market has been correcting as various levels of government and regulators took measures to curb spiraling prices and soaring debt in the country. Most recently, tougher mortgage guidelines came into play on Jan. 1, making it harder for prospective buyers to qualify for loans. Many buyers rushed into the market in December to get ahead of the rules. “It is not surprising that home prices in some market segments were flat to down in January compared to last year,” said Jason Mercer, the board’s director of market analysis. “At this time last year, we were in the midst of a housing price spike driven by exceptionally low inventory in the marketplace.” Read more here-https://bloom.bg/2C1JsyA
-Darryl Sittler’s record-setting jersey resurfaces after 42 years. MeiGray Group gave their stamp of authenticity on the jersey last Friday, just days before Wednesday’s 42nd anniversary of that historic night at Maple Leaf Gardens. All these years later, Sittler himself said he wondered. He didn’t know what happened to it after he took it off that night. He said in a text message to TSN it was “good to hear” it turned up again. Sittler will be in attendance at Air Canada Centre on Wednesday when the Leafs host Nashville. The story goes that Leafs owner Harold Ballard gifted it to someone after that game. It remained in private collections for 42 years, changing hands four or five times before landing with Meisel.
No one, especially not the notoriously stingy Ballard, could’ve imagined then the value of Sittler’s sweater today. Paul Henderson’s game-worn jersey from the 1972 Summit Series clincher is the most prized jersey in hockey history; it sold for $1.27 million (U.S.) in 2012. Barry Meisel president of MeiGray Group estimated Sittler’s sweater is worth approximately “25 to 50 per cent of that,” or “$350,000 to $500,000 U.S. dollars.” For Meisel, who has been collecting for more than three decades, this is a “Top 3” find. Meisel said he is open to selling Sittler’s famed sweater, but he wants to consider all his options first. This 42-year-old relic isn’t just a collector’s item. It’s a living, breathing piece of Toronto Maple Leaf’s history. Read more here-http://bit.ly/2GY3VrZ
-Why the Vaccinated Still Caught the Flu This Winter. Vaccination has been recommended for decades as the best way to protect yourself against flu, but it’s no silver bullet. The shot’s effectiveness varies from year to year, depending on the closeness of the match between that season’s viruses and the vaccine, which is usually reformulated each year. This winter in North America, its performance has been especially poor, leaving people more vulnerable to a virus that’s caused a spike in hospitalizations and deaths. In Hong Kong, schools are starting their Chinese New Year holiday earlier amid a flu epidemic that has claimed more than 100 lives in the city. Read more here-https://bloom.bg/2EOAXds
-The Flu: For influenza viruses, imperfection is strength. They constantly mutate, producing new strains that challenge immune systems primed to fight earlier varieties. That’s what makes flu a life-long threat to humans and the animal species, birds mainly, that are vulnerable to it. People often think of the flu as a bad cold. But it can lead to complications such as pneumonia and worsen underlying conditions like asthma and heart disease. Influenza kills as many as 650,000 people in a normal year. A virulent swine flu or the increasingly common avian variety can devastate farms, raising egg and meat prices. Such an outbreak also increases the odds of a flu virus emerging that people can easily catch and to which they have little or no immunity. In that case, a pandemic can occur, putting millions of lives at risk. Read more here-https://bloom.bg/2ErAgcl
-Blue Diamond Prices Are on the Rise. The fancy color diamond market is on the upswing, according to a report, with blue diamonds seeing the largest gains. Blue diamonds saw a 5.9% increase in value in the fourth quarter of 2017 in a year-over-year comparison, according to data published on Feb. 1 by the Fancy Color Research Foundation (FCRF). Pink and yellow diamond prices decreased slightly in the same period, at 0.8% and 1.8%, respectively. The market overall was up 0.1%. In November 2017, Christie’s sold a 8.67-carat fancy intense blue diamond ring in Geneva, Switzerland for $13.2 million. The reason for this disparity has less to do with demand, than it does with the rarity of the stone, says FCRF Chairman Eden Rachminov.
Demand for yellow and pink diamonds is actually higher, but the amount of blue diamonds being mined is decreasing. “Almost nothing is coming out of the ground,” he says. Pink diamonds have seen the highest gains in the last 13 years with an overall appreciation of 361.9%, according to FCRF’s index, which is compiled through survey data provided by manufacturers and brokers. However, blue diamonds began to appreciate at a higher rate starting in 2014, and have seen an overall appreciation of approximately 200% since 2005. In that same time period, traditional white diamonds appreciated 27.2%. “Fancy” colored diamonds are designated as such based on the color saturation of the stone and account for 1 out of every 10,000 diamonds found, says Russell Shor, senior industry analyst for the Gemological Institute of America.
Blue and pink diamonds are significantly rarer than yellow. According to the FCRF’s rarity evaluation tool, about 21 to 25 new round, two-carat, fancy-grade, yellow diamonds with very slight inclusions enter the market every year. A pink diamond of the same quality will enter the market once every three to four years. For a blue diamond, it is once every eight to 10 years. In terms of investment, however, a blue stone is not necessarily better than a pink or yellow, Rachminov says. Color quality should be the largest determinant in a stone’s value. “An amazing yellow stone can also be a great investment,” he says. According to Rachminov, new fancy colored stones will become increasingly rare as diamond deposits are depleted within the next half-century.
However, Schor says that the market is not entirely dependent on new finds. Stones that are recirculated through the market account for what he calls “an above-ground resource.” Schor estimates that approximately one-quarter of diamonds sold in jewelry stores were previously owned. But whether a fancy colored stone is new or used does not affect its value, says Rachminov. Either way, “it’s a very good place to preserve your wealth, and leave something for the next generation,” he says. However, getting your hands on a high-quality fancy colored stone may be easier said than done. While all the big jewelry houses invest in them, according to Rachminov, they are rarely advertised online. “You have to be invited to their back room,” he says. Read more here-http://bit.ly/2EargsG
Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00
Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33
Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00
Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67
Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33
-Gold Wins, Bitcoin Loses. So much for the digital currency providing negative beta. Oh, Bitcoin. Your problem was never that you were too unpredictable. It was always that you weren’t unpredictable enough. Bitcoin was never really going to cut it as a true currency. Its astronomical volatility which is a problem if you want certainty about the value of your transactions or wealth means that the likes of the Uzbekistani soum or the Ethiopian birr stand a better chance of supplanting the greenback. Still, Bitcoin’s disconnection from anything happening in the real-world ought in theory to be its greatest virtue.
The potential to provide negative beta to move in the opposite direction of other assets in a portfolio, and thus take the edge off any swings and dips has long been the best argument for investing in gold, Bitcoin’s shiny physical avatar. The past 10 or so days have shown that there’s some life in the old yellow metal yet. While the S&P 500 Index fell 7.8 percent from its peak on Jan. 26 to its trough Monday, gold’s drop was a modest 0.7 percent, only bettered among major assets by the 0.4 percent fall in U.S. 10-year Treasuries. Bitcoin crashed 35 percent, making it look more like a short-volatility ETF than a worthwhile hedge against market turmoil. Read more here-https://bloom.bg/2EtdoJ8
-China’s Love Affair with Gold Heating Up on Property Riches. China’s growing throng of affluent consumers is driving a rebound in demand for gold rings, bracelets and necklaces as a property boom and high stock market valuations boost wealth in the largest bullion market. “Things are much more positive than they were this time last year,” and the jewelry market has bottomed out after three years of declines, said Nikos Kavalis, London-based director of research firm Metals Focus Ltd.
Colleagues who visited the southern commercial hub of Shenzhen in early January told him showrooms were quite busy and wholesalers expected clients to return to replenish their stocks before Lunar New Year in the middle of February. The nation’s demand for gold jewelry climbed 10 percent last year to almost 700 metric tons as the wealthy increased purchases and consumption improved in second and third-tier cities, according to the China Gold Association. Buying of ornaments represented more than 60 percent of the 1,090 tons of gold consumed in China last year and made up a third of world jewelry demand.
Jewelry consumption in the second half was buoyed by holiday purchases and by retailers more effectively targeting the needs of customers, according to the World Gold Council in a report Tuesday, estimating that demand was 9 percent higher in the six months through December than a year earlier. “We’re still optimistic for the coming year, even though we have a high base,” said Kent Wong, managing director of Chow Tai Fook Jewellery Group Ltd., the world’s largest jeweler by sales. “The trend of growth will continue.” Prices in China have increased, and the rising market is giving people more confidence to buy jewelry as an investment, not just for everyday use as a decorative item, he said in an interview last month.
Rising demand in China could help boost global prices because of the size of the market. Gold in London advanced to the highest since 2016 last month as inflation fears and dollar weakness fueled demand. Holdings in bullion-backed exchange-traded funds are up about 40 percent in the past two years and increased to the largest stash since 2013 in January. Read more here-https://bloom.bg/2nJdpPK
-Gold Jewelry Demand Seen at 20-Year Low in United Arab Emirates. Gold jewelry demand in the United Arab Emirates sank to a 20-year low last year, the fourth consecutive annual decline, the World Gold Council said. Purchases fell 2 percent to 42.8 tons last year, the producer-funded council said Tuesday in an emailed report. The drop occurred even after fourth-quarter demand gained 16 percent as consumers rushed to buy to beat a 5 percent Value Added Tax that was imposed in January, it said. The U.A.E. and Saudi Arabia, the world’s biggest oil exporter, have been squeezed by a fall in crude prices over the past several years. U.A.E. per capita consumer gold demand dropped from 8.7 grams in 2013 to 4.8 grams in 2017 while Brent crude tumbled over the same period from $108.70 a barrel on average to $54.75, according to data compiled by the council and Bloomberg.
Iran and Kuwait were the only Middle Eastern countries that showed higher gold jewelry demand last year. Even after bar and coin demand in the oil-rich region more than doubled, to 40.5 tons, last year, the market “remains a shadow of its former self,” with average annual demand of about 70 tons in 2007 to 2016, the council said. Saudi Arabia, the region’s biggest buyer, bought 45.7 tons of gold jewelry last year, down 8 percent, according to the report. Iran came close to beating Saudi Arabia with jewelry demand of 45.4 tons, up 12 percent for the year and the most since 2013, the council said. Demand slowed in the fourth quarter, with a gain of 2 percent, as “worsening U.S.-Iranian relations undermined consumer sentiment,” the council said. Kuwait’s gold jewelry usage climbed 4 percent to 13 tons, while Egypt’s purchases slumped 14 percent to 22 tons, according to the report. Read more here-https://bloom.bg/2nTe7sK
-Greg Hunter: Peter Schiff Interview, Biggest Ever Debt & Dollar Crisis Coming. Money manager Peter Schiff says the wild swings in the market are because of massive central bank money printing and exploding debt. What in the heck is going on? Schiff explains, “The real question is what was going on when the markets were going up? That’s what made no sense. The fact that they are coming back down to earth makes a lot more sense. I think the catalyst for this move (in the stock market) is, ironically, the tax cuts we got because that put the bigger deficits in the spotlight.
Now, the deficits are going to go off the charts because we have to replace the lost tax revenue with more debt.” What about the economy improving under Trump? Schiff says, “Growth hasn’t really picked up, it’s actually slower. This is all nonsense. The economy is not improving. Nothing is happening other than we are going into huge debt. We got tax cuts, and we borrowed the money to pay for them.”
Schiff points out when countries get into financial trouble, they rev up the printing press to pay debts and expenses. Schiff contends, “We are going to do the same thing, and we are going to pay people off in money that has very little value. That is the real risk. That is why the dollar is already weakening. Last year, the dollar had the biggest drop in 14 years. This year, the dollar is off to its worst start since 1987. That tells you something.”
Schiff predicts, “Now, the crash in the dollar that I envisioned (years ago) and the crash in the U.S. economy is going to be much bigger than 2008 and much more dramatic and devastating to the average American as a result of the delay. We haven’t dodged the bullet, we have ended up stepping on an even bigger landmine.”
Schiff contends it’s not a matter of “if” there is going to be a dollar crisis, it’s simply a matter of “when.” Schiff points out, “All measures of gold and silver show it is inexpensive. The reason it is inexpensive is many people have the wrong view of the state of the U.S. economy and where monetary policy is headed. That’s where the value is because so few understand. It’s just like the 2008 financial crisis, people didn’t understand what was coming. I did.” Listen to more here-http://bit.ly/2nQN3L3 and http://bit.ly/2GZ8ZMM
-Jeff Clark: The Potential Big Surprise for 2018, and What It Means for Gold. There’s a sneaky development underway, one that’s been off the radar of most investors. It contributed to the recent stock market plunge, and if it really takes hold it has major ramifications for the three G’s: groceries, gas, and gold. What is this development? Here are a few hints.
- US Treasury yields are now at their highest level in four years, with the two-year note hitting a 10-year high
- The five-year German bund (their government bond) traded in positive territory for the first time since 2015
- The little-known ECEC (Employer Costs for Employee Compensation) jumped to 4.4% last year, more than triple the 1.3% reading in 2016
- And perhaps the most obvious clue of what may be on the horizon: the gap between what TIPS (Treasury Inflation-Protected Securities) pay and the 10-year note is now at its widest range since September 2014. That means inflation has been rising much faster than what the 10-year bond pays.
That’s right: Inflation is sneaking up. Read more here-http://bit.ly/2EOnDW9
-James Turk: Phase 2 Will Pave The Way For $11,000 Gold. Read more here-http://bit.ly/2EtGAjp
-The pattern that I see is that JPMorgan is continuing to take most of the gold that is issued for deliver on the COMEX, a pattern also clearly visible in silver for the last 7 years. As was the case in silver, while JPMorgan is the biggest taker of physical gold, it is also the largest paper short holder in COMEX dealings. Among many other things, this circumstance presents prima facie evidence of price manipulation, including intent to manipulate; as there could be no evidence more compelling than for a large entity to depress prices artificially in a derivatives market in order to buy the physical commodity cheaply.
That the regulators (CFTC and CME Group) look away is disgraceful, but the disgrace is theirs alone. One good thing about JPMorgan’s obvious scam is that it enables me to label the bank as crooked without fear of retribution. Early on, say five to eight years ago, I confess to being worried about the possible repercussions of publicly naming JPMorgan as a crooked bank, given its power and prestige. I’m sure regular readers have heard this many times and it has become somewhat routine and unremarkable.
That is understandable until you try to come up with another example of someone leveling similar allegations of illegality against any important financial institution. I’m not talking about internet trash talk about central bank conspiracies, anonymous or otherwise. I’m talking about specific criminal allegations made against a commercial entity, directly and publicly. I no longer worry along these lines and I do believe the allegations will make a difference in the future. Silver analyst Ted Butler Feb 03 2018 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-I ran across a data blurb about gold and silver in regards to China that I found interesting. I’m not quick to rely on the various statistical reports pertaining to China and India and gold and silver, because there are wide inconsistencies and questions of accuracy; but this report seems at least to be in keeping with international GDP data. It concerns gold and silver imports into China over the last year. Leaving aside the overly dramatic headline. China’s Silver imports shoot up in 2017; Gold imports plunge the article asserts that China imported close to 140 million oz of silver and 20 million oz of gold last year. We know that China uses most of the silver it imports in its manufacturing process for various applications, from solar panels to I-phones.
Given China’s share of the world economy and its well-known capacity to manufacture, there’s nothing out of bounds with 140 million oz being imported annually for this purpose. Gold, of course, in not used extensively in manufacturing processes, but China’s appetite for gold as jewelry and investment is well-known and I’m sure some would say the gold net import number looks low. Separately, reliable world mine production data indicate that China mines more gold than any country in the world, producing some 15 million oz a year, close to 15% of total world mine production (100 million oz). In silver, China is the third largest producer in the world, mining more than 110 million oz annually.
It is also well-known that China does not export any of its gold or silver (except where included in exported manufactured goods). What this means in simple analytical terms is that, effectively, China accounts for (and takes off the market) 30% of the total world silver mine production (250 million oz out of 850 million oz) and 35% of total world gold mine production (35 million oz of 100 million oz), truly remarkable percentages. With China accounting for such a large share of total world silver and gold mine production, it is even more remarkable what JPMorgan has been able to buy in both physical silver and gold over the past 5 to 7 years; some 700 million oz of silver and at least 20 million oz in gold. Silver analyst Ted Butler Jan 31 2018 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-Ted Butler: Silver commentary, Unfinished Business. The big news this week was the filing of charges and settlements for price manipulation and “spoofing” brought by the CFTC, in conjunction with the DOJ and FBI, against three banks and a half dozen individual traders; mostly involving illegal trading activities in COMEX gold and silver futures. The announcement set off a debate about whether the filing proved the allegations that gold and silver prices were manipulated as many, certainly including me, have maintained.
Put simply, the filings do not prove that silver and gold have been manipulated lower in price over the years. But then again, neither do the filings show that prices have not been manipulated in the manner I contend. What the charges do prove is that spoofing is a corrupt and illegal practice that should not exist in any form and on that basis. My immediate reaction is what the heck took the CFTC this long to act? Regular readers know I have railed against spoofing for many years as being completely devoid of any redeeming or legitimate features while the CFTC stood by. The practice of placing phony orders to influence price should have been outlawed from day one.
That said, I suppose it is good that the agency finally took action, under the kindest interpretation of the cliché of it’s better late than never. Certainly, those banks and traders accused of the practice will likely not do so in the future. And seeing the CFTC actually use the word manipulation in connection with COMEX gold and silver can’t be considered bad. Beyond that, unfortunately, the charges and settlements are troubling in that they only scratch the surface of whether silver and gold prices are manipulated. Truth be told, if the regulators were out to clean up what ails silver and gold pricing, then they didn’t come close with these filings.
If the CFTC was intending that this week’s announcements showed that it was truly cracking down on bad actors in silver and gold, then it failed. I would remind you that many of the violations announced took place while the CFTC was in the midst of its infamous five year silver “investigation”. Think I’m being too hard on the CFTC? Then try explaining how the agency has managed to ignore the activities of the most prominent gold and silver market crook of all JPMorgan. It’s not as if the agency hasn’t been given ample evidence of JPMorgan’s dominant role in manipulating prices ever since the bank took over Bear Stearns in 2008. I know because I’ve done nothing but make the case against JPMorgan for nearly all that time. Read more here-http://bit.ly/2EtqmH1