If It Pleases The Court, Jerome Powell Would Rather Congress Didn’t Ask Him About The Trade War

By Heisenberg Report

Jerome Powell is on Capitol Hill on Tuesday (it’s Humphrey Hawkins week, in case you forgot),  and his testimony will be scrutinized heavily in light of the trade frictions and the prospect that a trade-related downturn in global growth could spill over and put the brakes on U.S. economic momentum.

Last week, in an interview with American Public Media’s “Marketplace” program, Powell was non-committal on the trade issue, but his comments in Sintra as well as the June Fed minutes reflect some consternation about the balance of risks.

Generally speaking, his assessment of the economy will be characteristically upbeat, but as BofAML notes, “the more interesting take may come from his assessment on the risk to the economy, especially around tariffs.”

Continue reading If It Pleases The Court, Jerome Powell Would Rather Congress Didn’t Ask Him About The Trade War

Trade War Hysteria: Where’s The Beef?

By Anthony B. Sanders

VIX, TYVIX, Baltic Dry, Credit Spreads Calm

The news is constantly abuzz with scary “Trade War!” headlines. But it reminds me of Wendy’s hamburger ads from the early 1980s: “Where’s the beef?”

Let’s look at the VIX (S&P 500 volatility index).  It is showing no signs of stress.


How about the 10-year Treasury Note volatility index (TYVIX)? Nada.

Continue reading Trade War Hysteria: Where’s The Beef?

McEwen Mining (MUX) and the Magic of Accountancy

By Otto Rock

Ladies and gentlemen, boys and girls, sit back, relax and get ready for a super magic trick.

This is from the McEwen Mining (MUX) 2017 annual financials, as posted on SEDAR on February 22nd this year. It explains the financial performance of the San José Mine, which is owned by the Argentina registered mining company Minera Santa Cruz (MSC). As you may be aware, MSC is a company owned 51% by Hochschild (HOC.L) and 49% by MUX, a JV operated by HOC:

Above the red line is the 100% entity that is MSC, which as you can see booked a $4.75m loss for the year in 2017. Below the line is the 49% of the company attributable to MUX, which means MSC returned a loss for Rob McEwen’s precious metals mining company of $2.328m. That, along with benefits on amortization from MSC, meant that MUX could claim a U$11.916m tax credit from MSC for its final tax payments. In fact MUX claimed over $15.3m in tax credits last year, that U$11.9m being the lion’s share.

Continue reading McEwen Mining (MUX) and the Magic of Accountancy

How to Totally Misinterpret Deflationary Impulses

By Jeffrey Snider

Sometimes it pays to wait. Better to be sure than premature. In January 2014, the journal Central Banking handed out its inaugural awards. Among the recipients was Paul Volcker who was bestowed a lifetime achievement prize. The initial Governor of the Year honorific, something like a central banker MVP, went to Mario Draghi of the ECB. He graciously accepted in the glow of universal acclaim for the “unflappable conviction” of his July 2012 promise and the broad, cautious optimism it had provoked.

On behalf of the Governing Council, executive board and staff of the ECB, I’m honoured to be named governor of the year by Central Banking. Thanks to both the ECB’s actions and hard work by governments in implementing fiscal consolidation and structural reforms, conditions in financial markets have gradually eased since July 2012.

Just five months later the ECB was doing NIRP and a little less than a year beyond that the start of a QE program. This has as already expanded once, and as of the middle of 2018 it is still going.

Continue reading How to Totally Misinterpret Deflationary Impulses

Records Are Made to Be Broken

By Charlie Bilello

Viewing the New York City skyline from afar last month, I noticed something strange. I could no longer name a number of the tallest buildings.

The Empire State Building, the Chrysler Building, and the new World Trade Center were readily identifiable. But a new crop of skyscrapers was emerging from the shadows, seemingly overnight.

After doing some research, I learned that this was not just my imagination…

Within the next few years, a list of the tallest buildings in New York will look remarkably different. Of the top 20 tallest today, at least 13 will have been replaced. Explosive growth by any measure that few would have predicted back in the financial/real estate crisis that hit New York so hard just a decade ago.

Continue reading Records Are Made to Be Broken

Inversion Alert! Treasury Slope Plummeting Towards 0 BPS

By Anthony B. Sanders

Corporate Debt To GDP May Be At Credit Cycle High

One of the effects of The Federal Reserve’s zero interest policy (ZIRP) was the massive expansion of both consumer and corporate debt. The US may be at a credit cycle peak (Corporate Debt-to-GDP).

corporate debt to gdp 2

Which brings me to the UST 10Y-2Y slope, plummeting towards inversion (now at 24.5 BPS). The last time we saw the 10Y-2Y slope so flat was in early August 2007, 4 months before The Great Recession began.

Continue reading Inversion Alert! Treasury Slope Plummeting Towards 0 BPS

Freight Volume Does Not Support Imminent Recession Theory

By Chris Ciovacco


The Freight Transportation Services Index, calculated by the United States Department of Transportation, peaked in January 2005 or more than two years before the S&P 500’s major top in October 2007.   After the October 2007 peak in stocks, the  Freight Transportation Services Index dropped sharply as shown in the chart below.


A Look at SOMA Changes Influence on SPX Since Quantitative Tightening Began

By Rob Hanna

The chart below is from this weekend’s QE subscriber letter. It is one I have updated frequently the last few months. It looks at compound performance of two opposing strategies. The blue line represents a strategy that is invested in the market during weeks that the Fed’s SOMA account value rises. During weeks where the SOMA declines, the blue line is sidelined (earning no interest). The red line takes the opposite approach. It is in the SPX during SOMA contraction weeks, and it is sidelined when the SOMA expands. (The SOMA is the Fed’s System Open Market Account that contains all of its bond holdings.) SOMA changes are released each Thursday, and look at a Thursday – Wednesday reporting week.


Continue reading A Look at SOMA Changes Influence on SPX Since Quantitative Tightening Began

The Great Gold Upgrade, Report 15 July 2018

By Keith Weiner

[biiwii comment: Au & Ag supply/demand report follows opening segment]

In part I the Great Reset, we said that a reset is a terrible thing. The closest example is the fall of Rome in 476AD, in which more than 90% of the population of the city fled or died. No one should wish for this to happen, but we are unfortunate to live under a failing monetary system. Debt is growing exponentially. A way must be found to transition to the use of gold. We covered a few ways that won’t work. The Fed can’t determine the right gold price, or indeed control the price either. Nor would it work to declare the dollar to be gold backed. A high gold price won’t make gold circulate. Nothing less than redeemability will do. But you cannot retroactively declare the irredeemable dollar to be gold-redeemable. Every dollar in the system was borrowed into existence without the expectation of redemption. Changing this rule would create the greatest orgy of lobbying Washington has ever seen.

Interest Draws Gold into Circulation

Interest is the only force that can pull gold out of private hoards and into circulation. We have said many times, that interest is the regulator of flow in the gold standard. A lower rate will tend to push gold out of the market and into hoards. A higher rate will tend to draw it into the market.

Continue reading The Great Gold Upgrade, Report 15 July 2018

US Yield Curve Continues Flattening To 26.4 BPS…

By Anthony B. Sanders

…As Net Shorts in 10-year Treasury Futures Hit Record Levels

It is difficult to predict how the trade scuffles between the US, China and Europe will play out.

But what we do know is that the US Treasury 10Y-2Y slope continues flattening, now down to 26.4 basis points.


Meanwhile, net shorts in 10-year Treasury futures positions hit record levels. Net short positions on the 10-year future rose to more than half a million contracts in the week ended July 3, according to the latest data from the Commodity Futures Trading Commission. These positions were built as the 10-year Treasury yield fell to around 2.83 percent on July 3, and it’s currently around 2.86 percent.

Continue reading US Yield Curve Continues Flattening To 26.4 BPS…

‘It’s Like A Death Wish’: Jeff Gundlach Takes Aim At Toxic Policy Mix, Demands You ‘Respect’ The Curve

By Heisenberg Report

When last we checked in on bond king for the post-Gross world, exposer of WSJ conspiracies, and man who showed up at Sohn dressed in a Jack Nicholson Joker costume, Jeff Gundlach, the DoubleLine boss was busy explaining how the U.S. was mixing up a toxic cocktail of Fed hikes and deficit spending.

Specifically, Jeff said the following during his latest webcast:

Increasing the size of the deficit while we’re raising interest rates almost seems like a suicide mission.

Right. And you can trust him on that, because any man brave enough to wear a purple corduroy halloween costume in late April is a man who knows something about “suicide missions”.

Here’s the chart, although there’s nothing at all unique about it:


Continue reading ‘It’s Like A Death Wish’: Jeff Gundlach Takes Aim At Toxic Policy Mix, Demands You ‘Respect’ The Curve

$247 Trillion and (Rapidly) Counting

By Doug Noland

I chronicled mortgage finance Bubble excess on a weekly basis. Relevant data were right there in plain sight, much of it courtesy of the Federal Reserve. Yet only after the Bubble burst did it all suddenly become obvious. Flashing warning signs were masked by manic delusions of endless prosperity and faith in the almighty “inside the beltway”. These days, data for the global government finance Bubble is not as easily-accessible, though there is ample evidence for which to draw conclusions. It will all be frustratingly obvious in hindsight.

The Institute of International Finance is out with their latest data that, unfortunately, is not made available in detail to the general public. Global debt ended the first quarter at a record $247 Trillion, or 318% of GDP. Even after a decade of historic Credit inflation, global debt continues to expand at (“Terminal Phase”) double-digit rates (11.1% y-o-y).

Global debt growth accelerated during the first quarter to $8.0 Trillion – and surged $30 Trillion over just the past five quarters. In a single data point not to be disregarded, Global Debt Has Expanded (a difficult to fathom) $150 Trillion, or 150%, Over the Past Ten Years. Actually, the trajectory of Bubble-period Credit expansion may seem rather familiar. It’s been, after all, a replay of the reckless U.S. mortgage Credit episode, only on a much grander global scale.

Continue reading $247 Trillion and (Rapidly) Counting