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zerohedge.com / by Tyler Durden on 02/10/2016 11:03
And another one bites the dust.
On the heels of Tuesday night’s New Hampshire primaries that saw Donald Trump sweep to victory over a GOP field where no other candidate came close to challenging the brazen billionaire, New Jersey Governor Chris Christie is set to suspend his campaign.
As CNN reports, Chrisitie’s sixth place finish in New Hampshire pretty much put the nail in the coffin for the governor. “Failure to qualify for next debate, lack of money make it impossible to continue,” Bloomberg writes.
news.goldseek.com / Julian D.W. Phillips / 10 February 2016
Gold Today –The New York gold price closed Tuesday at $1,187.80 down from $1,190.20 down $2.40. Ahead of London’s opening, prices were quoted at $1,185. As London opened the gold price hovered around $1,183. Then the LBMA set it at $1,183.40 down from $1,188.90 down $5.50 with the dollar index almost the same at 96.12 down from 96.04 on Tuesday. The dollar continues weak against the euro at $1.1260 up from $1.1285 against the euro on Tuesday. The gold price in the euro was set at €1,050.98 down from €1,053.20. Ahead of New York’s opening, the gold price was trading at $1,183.65 and in the euro at €1,051.15.
Silver Today –The silver price in New York closed at $15.23 down 8 cents at Tuesday’s close. Ahead of New York’s opening, the silver price stood at $15.16.
Gold (very short-term)
The gold price will consolidate with a weaker bias, in New York today.
Silver (very short-term)
The silver price will consolidate with a weaker bias, in New York today.
financialsense.com / GLOBAL RISK INSIGHTS / 02/10/2016
In a recently released annual report, the Federal Reserve issued rules for stress-test scenarios that include a move to negative interest rates. While the report is careful to categorize the scenarios as merely hypothetical, investors would be prudent to seriously consider what such a stress-test may reveal about the Fed’s thinking after a jolting start to the year for global markets.
Mandated as part of the Dodd-Frank Wall Street Reform Act of 2010, the Federal Reserve requires US banks to perform annual financial readiness drills, or stress-tests, in which they subject their capital structures to multiple economic situations outlined by the central bank.
The scenarios in the recent report range from baseline to adverse and severely adverse and all start in the first quarter of this year. It is the severely adverse hypothetical for 2016 that describes a steep dive into recession, unemployment levels hitting 10%, and a subsequent move by the Fed that takes interest rates down to negative .5%.
Economic weakness is not limited to the US for this scenario, as it incorporates “severe recessions” across the developed economies of the Eurozone and Japan, with more mild contractions across Asia. Deflationary forces push consumer prices down markedly and the stock markets may endure a 50% sell off.
“There are several potentially substantial legal and practical constraints to implementing a negative IOER rate regime, some of which would be binding at any IOER rate below zero, even a rate just slightly below zero. Most notably, it is not at all clear that the Federal Reserve Act permits negative IOER rates, and more staff analysis would be needed to establish the Federal Reserve’s authority n this area.”
No legal authority? No problem. Just call in Mario Draghi’s lawyer, or any other legal representative of Goldman Sachs and/or its former employees, and whatever amendments need to be made to the Federal Reserve Act, will be made.
Because, when pressed on The Fed’s legal authority to take interest rates negative, Janet Yellen gushed that “Fed authority for negative rates is still a question.” This appears to have been taken as bad news by the market (cutting off the potential easing paths of the future in a world of NIRP), and stocks, crude, USDJPY have all tumbled.
wallstreetexaminer.com / by Lance Gaitan via Economy and Markets /
A couple weeks ago the Bank of Japan made a startling move when it pushed a key interest rate into negative territory. After one of its officials had said just a week prior that the central bank wasn’t considering this option, the world was needless to say a little stunned.
Now there’s a lot of speculation on whether the bank was planning it all along. And of course the speculation has filtered its way over here with everyone wondering now whether the Fed will raise rates in March, June, or not at all. Many are now wondering whether the Fed will go negative as well.
But speculation’s not really my thing. We can spend hours talking in circles about what the Fed will do and when. Everyone seems to get all worked up about what the group says to get an idea toward future policy. What is important, though, is having an idea about how the market will react.
Don’t get me wrong, I’m always hopeful the Fed will say something interesting when they release their policy statement, although it’s usually pretty mundane… even boring. But what they say and do can have a huge impact on the market, so it pays to listen.
Since last month’s Fed meeting was the first of the year, I want to give you a little background on the organization that seems to hold so much influence over the direction of the economy.
Most of it is pretty cut and dry. The Federal Open Market Committee (FOMC) meets about eight times a year to discuss policy.
zerohedge.com / by Tyler Durden on 02/10/2016 10:44
When it comes to government bail outs of insolvent banks few are as qualified to opine as John Mack who was CEO of Morgan Stanley when the bank, along with all other U.S. TBTF banks, was bailed out with a multi-trillion rescue package in the aftermath of the Lehman failure. Which is why it was illuminating, if not surprising, that during an interview with Bloomberg TV discussing the future of Deutsche Bank, John Mack said that “there’s no question in my mind, it is absolutely good for every penny.” In other words, “Deutsche Bank is fine.”
Why is he so confident? According to Mack, “this idea that I heard yesterday, the possibility of not making their interest payments, it’s just absurd. The government will not let that happen.”
Said otherwise, it will be bailed out. One wonders if Germany’s citizens were polled before John came up with this conclusion.
When most people try to make a point about how aggressive and militaristic our cops have become, they typically draw upon pop culture references, such as the Andy Griffith Show. They’ll say “Whatever happened Mayberry? Whatever happened to that polite sheriff and his goofy deputy?” It’s one of the most effective ways to express how creepy our police have become over the years, because it’s so much easier for the average person to digest a pop culture analogy. And since movies and TV shows draw upon real life to give their stories some semblance of accuracy, these analogies can still inform us about what has transpired in the real world.
However, it isn’t just beat cops and small town sheriffs that have changed over the years. Our SWAT teams have also seen an alarming evolution since they first started showing up in our major cities in the 60’s and 70’s. Arguably, the idea of a SWAT team was initially a good idea. It wasn’t uncommon in metropolitan areas, for there to be crimes that required a heavily armed police response.
But over time, these SWAT teams grew in number, and eventually started to resemble elite military units. And with that, they started being deployed for just about any crime under the sun. Now about 80% of small cities with a population between 25,000 and 50,000 have a SWAT team, and by some estimates, there are as many as80,000 SWAT raids every year. Most of these raids are for private residences, and many of them don’t even involve violent people. Essentially, what started out as a good idea, has become an excuse for our government to bypass posse comitatus, and deploy veritable soldiers on our streets to enforce the law.
marctomarket.com / by Marc Chandler / February 10, 2016
There are few industries that offer a picture glass window to see numerous macroeconomic forces as steel does. Excess capacity, trade policy, and the yuan all intersect when looking at the steel industry. Moreover, it also shed light on why the drop of energy and other commodity prices, such as iron ore, have not bolstered the steel industry, let alone the general economy, as many expected.
At the heart of the problem is that globally there is greater capacity to produce steel than demand. That excess capacity is not simply a function of the state planning effort of China. Rather Europe also suffered from excess capacity. It lost a quarter of its steel workforce since 2009. The slow growth in Europe sapped demand while exports from China are boosting supply. Last year, China’s steel exports rose by 50%, while prices for some steel products fell by 50%.
China joined the WTO in 2001. It has argued that after 15 years, it should automatically be given market economy status. This particular designation is important because it would make it more difficult to pursue anti-dumping charges. The US argues that this is not an automatic process and that China does not yet deserve that designation. The European Union, in contrast, appeared to be looking to curry favor with Beijing, signaled was leaning to granting market economy status to China. The US argued this was similar to unilateral disarmament. Europe countered that it had other trade defenses.
In the past when countries want to challenge Chinese trade practices by filing charges at the WTO. Now China is encouraging the EU not to retaliate but to go to the WTO. It is not clear the logic, but when George W. Bush imposed steel tariffs in 2002, part of the logic was that, even if they violated the WTO (which they did), it would take a couple of years to sort it out. It might be the same logic for Beijing.
zerohedge.com / by Tyler Durden on 02/10/2016 10:39
Following last night’s across the board build in inventories from API, DOE reported a surprising 750k drawdown (much less than the 3.2mm build expected). However, across the rest of the complex – inventories rose: Cushing +523 build (13th week in a row), Gasoline +1.26mm build, and Distillates +1.28mm build (first in 4 weeks). Having tumbled early on from Yellen’s undovishness, crude spiked on the headline draw (back above $29) but is struggling to hold gains.
mauldineconomics.com / BY GEORGE FRIEDMAN / FEBRUARY 10, 2016
Most investors know what an emerging market is. Some might even be able to offer a pretty good definition of what puts the “emerge” into emerging markets. But ask about the Middle East, and no one really knows what it is.
Out of sheer necessity, the name “Middle East” was invented at the start of the 20th century. The need for a name was anchored in a geographic puzzle: how to distinguish the region between the Near East and the Far East. Depending on whom you ask, credit for coining the term “Middle East” goes to either the American military or the British government. Either way, the area’s new identity was determined by outsiders.
The term Near East originally referred to the Ottoman Empire, while the Far East meant East Asia. When the Ottoman Empire disintegrated, it was vital to find a new term for the area that is today Turkey. The name “middle east” was popularized in 1902 by US Naval strategist Alfred Thayer Mahan in an article he authored that ran in the National Review. It has since entered the global lexicon as a term that everyone knows yet few can quite define.
Today, the region that stretches from the eastern Mediterranean to the Iran-Afghan border, and from Turkey south (to include the entire Arabian Peninsula) is what we know as the Middle East.
The region, however, is far more complex than lines on a map that reveal a discrete geography. It can also be defined based on ethnic and religious bloodlines.
In this Middle East, the Arab world stretches from Morocco to Iraq and excludes non-Arab Muslim countries like Turkey and Iran.
If we think in terms of the Muslim world, this Middle East might stretch from Morocco to Afghanistan, south into Africa, and north into Central Asia and southeastern Europe.
Although it gets short shrift in the history textbooks, in many ways the modern American empire can find its origins in the Spanish-American War. Today we talk to James Perloff of JamesPerloff.com about his article on the war, “Trial Run for Interventionism,” and how the bankers used their media and political connections to launch the war and introduce foreign interventionism to the American psyche.
zerohedge.com / by Tyler Durden on 02/10/2016 10:04
Well, no one can say the writing wasn’t on the wall.
With Europe at a complete and total loss as to how to deal with the bloc’s worst refugee crisis since World War II, countries have increasingly adopted their own, ad hoc “solutions” which include razor wire anti-migrant fences in Hungary and the suspension of Schengen in Austria, where the backlash against asylum seekers is growing more palpable by the day.
An ill-fated quota system devised by Berlin and Brussels proved more divisive than it did helpful and the wave of alleged sexual assaults that swept through the region on New Year’s Eve threatens to derail the settlement effort altogther.
caseyresearch.com / Justin Spittler / February 09, 2016
Gold has rocketed to new highs…
Yesterday, the price of gold jumped 1.3%. It closed the day at its highest level since June 2015. It’s up 13% on the year…
Gold is a commodity like coffee, copper, or aluminum. But unlike other commodities, gold is money. It’s held its value for thousands of years. Gold is a “safe haven” asset, which is why investors often buy gold when the stock market is struggling.
• The S&P 500 has fallen 9% this year…
Yesterday, it fell 1.4% to its lowest level since April 2014. Eight of the ten sectors in the S&P 500 are down this year.
All major U.S. indexes have struggled this year. The Dow Jones Industrial Average has fallen 8%. The tech-heavy NASDAQ has dropped 14%. The Russell 2000, which tracks 2,000 small U.S. stocks, has dropped 15%.
• Even FANG stocks are plummeting…
FANG stands for Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Google (GOOG).
These four stocks were among the market’s best performing stocks last year. Netflix, the top performer in the S&P 500, surged 134%. Google, the tenth best performer, climbed 44%. But the S&P 500 as a whole ended the year down 0.7%.
zerohedge.com / by Tyler Durden / 02/10/2016 09:58
This is probably not what the bulls wanted to hear. Moments ago Goldman released its take on Yellen’s testimony set to begin momentarily, and contrary from a dovish take the bank which has spawned more central bankers in world history than any other, said that her prepared remarks “suggest additional hikes remain FOMC baseline ”
BOTTOM LINE: Chair Yellen’s prepared remarks to the House Financial Services Committee contained little new information on the monetary policy outlook, and were roughly in line with comments made by Vice Chair Fischer and New York Fed President Dudley over the past couple weeks. She continued to highlight the FOMC’s expectation for “gradual” increases in the federal funds rate.
1. Regarding recent turmoil in financial markets, Chair Yellen acknowledged that “Financial conditions in the United States have recently become less supportive of growth”, and that “if they prove persistent, could weigh on the outlook for economic activity and the labor market”. However, she also mentioned that “Declines in longer-term interest rates and oil prices provide some offset”.
wallstreetonparade.com / By Pam Martens and Russ Martens: February 10, 2016
CNN Reports That a Stunning 40 Percent of Democratic Voters in New Hampshire Want Policies More Liberal Than Obama’s
The world woke up this morning to find that the populist stirrings that were fanned by the leaderless Occupy Wall Street movement, which first galvanized the debate on the wealth and income inequality of the 99 percent, have been simmering in the hearts and minds of voters ever since. Apparently, voters were simply waiting for an authentic presidential candidate to frame their demands into a cohesive message. Yesterday, Senator Bernie Sanders of Vermont crushed Hillary Clinton in the first presidential primary in New Hampshire, taking 60 percent of the Democratic vote to Hillary’s 38.4 percent with over 90 percent of the vote counted.
Donald Trump took 35.1 percent of the Republican vote, with the current Governor of Ohio, John Kasich, coming in at a distant second with 15.9 percent, based on a little over 90 percent of the vote counted. (See full results here.)
No one is exactly sure what message Republican voters are trying to send, although some suspect it’s that they want a billionaire candidate with the guts to talk dirty in public and insult women and minorities – in other words, they want to live vicariously through Trump in an Archie Bunker remake of America. At a campaign rally in Manchester, New Hampshire, just one day before the primary, Trump repeated into the microphone what an audience member yelled out, calling rival Ted Cruz a “p—y.” Trump has alsodisparaged Carly Fiorina’s face, bizarrely questioning if it rendered her unfit for the White House, while proposing to temporarily ban all Muslims from entering the U.S., which led to a call to ban Donald Trump from entering the U.K. – not the finest moment in diplomacy for the U.S.
One key finding from the exit polls in New Hampshire is that despite billions of dollars spent by the Koch brothers and their ilk in attempts to make the word “liberal” a four letter word, voters are now prepared to stake their claim to the mantle. In the video clip below, a very animated David Chalian, CNN’s Political Director, explains that exit polls among Democrats in New Hampshire yesterday showed that a whopping 40 percent of Democrats want someone more liberal than Obama.
zerohedge.com / by Tyler Durden / 02/10/2016 10:20
Rumors of ECB monetization (which would be highly problematic in the new “bail-in” world) and old news of the emergency debt-buyback plan have sparked an epic ramp in Deutsche Bank’s stock this morning (+11% – the most since Oct 2011). This extreme volatility is, however, eerily reminiscent of 2007/8 when headline hockey sparked pumps and dumps on a daily basis in Lehman stock… until it was all over.
You know it’s bad when the finance minister of Germany has to publicly state he has “no concerns” about his country’s biggest lender –Deutsche Bank – as Wolfgang Schauble did on Tuesday while bank shares plummeted.
It’s been brewing for a while.
The business models available to European banks, the methods by which they make money on a consistent basis, are disappearing fast and investors are taking flight.
Here’s a stunning chart from David Buik at Panmure Gordon to illustrate what that’s done to bank stocks this year:
zerohedge.com / by Tyler Durden / 02/10/2016 09:56
Fed Chair Yellen will be presenting her semi-annual monetary policy testimony – sometimes called the “Humphrey-Hawkins” testimony – today (House Financial Services Committee) and tomorrow (Senate Banking Committee). Her prepared remarks offered little new information over the January FOMC Statement but the Q&A will likely be the most market-moving as politicians likely demand she “get back to work” for the good of the nation’s shareholders.
An indicator based on the first hour versus last hour of stock trading has undergone a shift similar to those seen at the prior 2 cyclical tops.
We’ve written about the intraday “Smart Money Indicator” on several occasions throughout the years, including last March. This post echoes that one from March almost word for word as the message is the same. The only difference is that our confidence in the interpretation of its present behavior is much higher now based on the evidence.
The theory goes that trading done in the stock market early in the day is indicative of the eager and emotional “dumb money” reacting to developments occurring since the prior day’s close. Conversely, trading during the final hour of the day is representative of the more deliberate and calculating “smart money” traders. While there is certainly no way to prove (or disprove) this notion, taking measure of the early and late-day trading patterns can elicit some interesting observations, present circumstances included.
One researcher that tracks such data is Jason Goepfert at Sentimentrader.com. Goepfert subtracts the day’s change in the S&P 500 after the first half hour of trading and adds the change that occurs in the final hour of trading. He then tracks the cumulative running tally of the daily readings in what he calls the “Smart Money Indicator” (SMI). The SMI is exhibiting some interesting behavior currently. After generally trending lower since the March 2009 stock market low, and in particular during the relentless rally since 2012, the SMI has begun to curl upward. This is noteworthy since we saw the same behavior near the cyclical tops in 2000 and 2007.
merkinvestments.com / By: Axel Merk / 10 February 2016
“The Fed doesn’t have a clue!” – I allege that not only because the Fed appears to admit as much (more on that in a bit), but also because my own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower – think what happened in 2000. What are investors to do, and when will we reach bottom?
To understand what’s unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.
The Fed and the Markets
In our analysis, policies at the Federal Reserve Open Market Committee (FOMC) are driven by what the Fed Chair deems most important. At the risk of oversimplification, and to zoom in on what I believe is relevant in the context of this discussion, former Fed Chair Alan Greenspan put a heavy emphasis on the ‘wealth effect;’ in many speeches, both during and after his tenure at the Fed, he indicated that rising asset prices would be beneficial to investment and economic growth. His successor Ben Bernanke went as far as mentioning in FOMC Minutes rising equity prices as a beneficial side effect of quantitative easing (QE). Bernanke’s framework, though, was indirect: he considered himself a student of the Great Depression, arguing that monetary accommodation shouldn’t be removed too early when faced with a credit bust, as doing so might unleash deflationary forces once again. QE, of course, ‘printed money’ to buy Treasuries and Mortgage Backed Securities (MBS), i.e. intentionally sought to increase their prices (I take the liberty to call QE the printing of money because, amongst others, Bernanke himself has referred to QE as such; no physical money is printed, but it’s created ‘out of thin air’ through accounting entries at the Fed).
This prelude is necessary to understand Janet Yellen, a labor economist. I am not aware of labor economists focusing on equity prices. Neither am I aware that labor economists use forward inflation expectations as a gauge to predict labor markets. Sure enough, any FOMC member is likely to look at various indicators of inflation in the course of their job, but for a labor economist, it may merely be yet another data point.
news.goldseek.com / By Avi Gilburt / 10 February 2016
First published Sat Feb 6 for members: Back in 2011, the market was eagerly waiting for gold to exceed the $2,000 level. Everyone viewed it as a certainty at the time. Yet, we suggested that it was time to sell once we struck the $1,915 level, with the market topping out only 6 dollars higher.
Now in 2016, the great majority of the market was equally certain that gold was going to drop below $1,000. However, our BUY box on our chart – which originally was provided to members several years ago, and has remained quite consistent – was prominently presented just a bit above the $1,000 mark, with the GDX BUY region just below the 13 level, and silver’s beginning at 14. And, after a 4+ year correction, our BUY boxes have all been struck.
This past week, we experienced the strongest rally in the miners that has been seen in many years. And, some are questioning if this represents the initial rally off the long term bottom, while many others view this as yet another corrective rally. My personal perspective is that this is the best potential we have seen for a true long term bottom since we struck our highs over 4 years ago.
With regard to the GDX, we have been noting for a few weeks that the bottom struck within our long term BUY box has been struck with a completed bottoming 5-wave structure at the 12.40 level. However, we also noted that in order to confirm a long term bottom being in place, not only must we complete the pattern to the downside, we must also complete an initial 5 wave structure off the lows.
Thus far, we have a completed bottoming pattern in place, and seem to be in the heart of the 3rd wave off that bottoming pattern. Ideally, all 5 waves should be taking us towards the 21/22 region, which is the path we have clearly laid out on our chart for quite a long time. Moreover, we needed certain resistance levels to be broken to dispel the notion of an extended 5th wave lower. This past week, with the last minute move through the 17.04 level on Friday, all those levels have now been broken.
zerohedge.com / by Tyler Durden / 02/10/2016 08:56
With algos not exactly enthralled by their initial several million reads of the key soundbites in the Yellen speech, they – along with carbon-based traders – are looking for guidance elsewhere. One place they traditionally go to is Fed mouthpiece Jon Hilsenrath, who unfortunately appears to be out of the loop lately, and the best he could do was underscore what the market already noted.
Specifically, Hilsy highlights Yellen’s concerns that “financial conditions have become less supportive of economic growth, stresses in China and other foreign economies could weigh further on the U.S., and market expectations for inflation are sinking” and added that “without explicitly pointing to the prospect of delayed rate increases, her recitation of these risks gave her comments a downbeat undertone.”
Which brings us to the only question that matters today: is a “downbeat undertone“,aka bad news, good news for stocks once again, and will the market relapse to its old “bad news is great news” regime, or will it take advantage of today’s brief European bank euphoria to sell the rally as it has throughout all of 2016?
“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.” ― Adrian Rogers