The “Big Bond Short” Illusion

By Kevin Muir

Before we even start, I want to point out I deserve zero credit for this next idea. All of the following insightful observations are brought to you by Adam Collins of Movement Capital. Adam’s work on COT data is second-to-none and he is a must-follow.

Over the past few months I have struggled with a glaring inconsistency.

The CFTC’s Committment of Trader’s (COT) data for the 10-year US treasury note has displayed a large increase in the size of the net speculative short position, yet this is at odds with what I observed in terms of market sentiment amongst traders and portfolio managers.

This increase in speculative net shorts has pushed it to a record position.

Continue reading The “Big Bond Short” Illusion

The Myth of Gold Stock Leverage

By Steve Saville

A few years ago I wrote a couple of pieces explaining why gold mining is a crappy business. The main reason is the malinvestment that periodically afflicts the industry due to the boom-bust cycle caused by monetary inflation.

To recap, when the financial/banking system appears to be in trouble and/or economic confidence is on the decline, the perceived value of equities and corporate bonds decreases and the perceived value of gold-related investments increases. However, gold to the stock and bond markets is like an ant to an elephant, so the aforementioned shift in investment demand results in far more money making its way towards the gold-mining industry than can be used efficiently. Geology exacerbates the difficulty of putting the money to work efficiently, in that gold mines typically aren’t as scalable as, for example, base-metal mines or oil-sands operations.

In the same way that the malinvestment fostered by the creation of money out of nothing causes entire economies to progress more slowly than they should or go backwards if the inflation is rapid enough, the bad investment decisions fostered by the periodic floods of money towards gold mining have made the industry inefficient. That is, just as the busts that follow the central-bank-sponsored economic booms tend to wipe out all or most of the gains made during the booms, the gold-mining industry experiences a boom-bust cycle of its own with even worse results. The difference is that the booms in gold mining roughly coincide with the busts in the broad economy.

Continue reading The Myth of Gold Stock Leverage

Why the Fed Denied the Narrow Bank

By Keith Weiner

It’s not every day that a clear example showing the horrors of central planning comes along—the doublethink, the distortions, and the perverse incentives. It’s not every year that such an example occurs for monetary central planning. One came to the national attention this week.

A company called TNB applied for a Master Account with the Federal Reserve Bank of New York. Their application was denied. They have sued.

First, let’s consider TNB. It’s an acronym for The Narrow Bank. A so called narrow bank is a bank that does not engage in most of the activities of a regular bank. It simply takes in deposits and puts them in an account at the Fed. The Fed pays 1.95%, and a narrow bank would have low costs, so it could pass most of this to its depositors. This is pretty attractive, and without the real estate and commercial lending risks—not to mention derivatives exposure—it’s less risky than a regular bank. According to Bloomberg’s Matt Levine, saving accounts for large depositors average only 0.08% interest.
Continue reading Why the Fed Denied the Narrow Bank

Fed Shed: Balance Sheet Down $245 Billion Since September ’17

By Anthony B. Sanders

10-Year T-Note Yield UP From 2.06% To 2.90%

The Fed’s Quantitative Tightening (aka, Fed Shed) has resulted in a decline of their balance sheet of $245 BILLION since September 2017, about one ago.

fedshed

And the 10-year Treasury Note yield has climbed from 2.06% in September 2017 to 2.90% today.

Shedding Dog

Support 100% ad-free Biiwii.com by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

LatAm GDP in 2018: Forecasts Versus Reality (from IKN484)

By Otto Rock

This piece was part of IKN484, out last weekend. 

How LatAm and Carib economies are doing compared to expectations
Generally recognized as the best regional macro-economic study group, CEPAL held its mid-year update in Mexico last weekend and during the week I had chance to catch up on its mid-term report on Latin America and the Caribbean. As usual there’s a lot of information, both on the overview and granular ends, as you’d expect from a 242 page document (get yours on this link here (4) if economics in Spanish language is your thing too…yummy), but after perusing through I think this chart (with personal notes added) is a useful guide to the region and its economies, worth a segment on the Weekly.

What we see is the GDP performance in 2018 of the regional countries, done in order of GDP growth (e.g. Dominican Republic is doing best at +5.4% growth this year, Venezuela worst at -12%). Expectations for growth weren’t on the spectacular end of the spectrum at this point in the cycle, so numbers like +4% or +5% may be good and solid but they’re not going to make world headlines against the +7% of China or +8% of India. Which brings me to the reason I chose this particular graphic, as it charts the current estimates for 2018 compared to CEPAL’s own forecast made for 2018 at the end of last year.

Continue reading LatAm GDP in 2018: Forecasts Versus Reality (from IKN484)

Simple And Powerful Stock Market Charts

By Chris Ciovacco

Support 100% ad-free Biiwii.com by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

Tesla Conference Call Preview

By Tim Knight

Support 100% ad-free Biiwii.com by making a donation of your choice!

Or better yet, subscribe to NFTRH Premium for an in-depth weekly market report, interim updates and NFTRH+ chart and trade ideas to get even more bang for your buck. You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar. Or follow via Twitter @BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

Global Equities Breadth Check – As Bad as 2015

By Callum Thomas

As I was going through and updating some client chart packs, I noticed an interesting development in the global equities country breadth charts.  The proportion of countries (we track 70 for this analysis) trading above their respective 200-day moving average (a good rough proxy for whether a market is an up vs down trend) reached the lowest point since the twin corrections and near-miss global recession of 2015/16.

I think this is a key chart to be across because it feels like we are in a similar potential kind of “near-miss” scenario where the pressure is really starting to mount on emerging markets.  The way a lot of key markets, e.g. global cyclicals vs defensives, are trading right now it’s not going to take much at all to trigger off a broader and deeper correction.  So the improvement that we’ve already seen in valuations might look better before long…

Continue reading Global Equities Breadth Check – As Bad as 2015

Approaching the 10-Year Anniversary

By Doug Noland

We’re rapidly Approaching the 10-year Anniversary of the 2008 financial crisis. Exactly one decade ago to the day (September 7, 2008), Fannie Mae and Freddie Mac were placed into government receivership. And for at least a decade, there has been nothing more than talk of reforming the government-sponsored-enterprises.

It’s worth noting that total GSE (MBS and debt) Securities ended Q3 2008 at $8.070 TN, having about doubled from year 2000. The government agencies were integral to the mortgage finance Bubble – fundamental to liquidity excess, pricing distortions (finance and housing), general financial market misperceptions and the misallocation of resources. GSE Securities did contract post-crisis, reaching a low of $7.544 TN during Q1 2012. Since then, with crisis memories fading and new priorities appearing, GSE Securities expanded $1.341 TN to a record $8.874 TN. Of that growth, $970 billion has come during the past three years, as financial markets boomed and the economy gathered momentum. A lesson not learned.

Continue reading Approaching the 10-Year Anniversary

The Bullish CoT Setups in Gold and Silver

By NFTRH

You may know me as the guy using weird planetary alignments while assigning proper fundamentals to the gold sector, and recently even doing the same with a somewhat subjective and philosophical view of gold as an important counterweight or insurance component to a sensible portfolio. Or you may know me as the guy who confuses you with too many market indicators or annoys you with too many exposés of the more promotional and/or manipulative entities out there.

Or you may not know me at all.

If that is the case, let me introduce myself. My name is Gary and today I have a very simple post for your consideration. We will look at the now compelling views of the Commitments of Traders (CoT) data for gold and silver. While the prices of the metals are and have been technically bearish and the fundamentals are and have been poor, sentiment (CoT is ultimately a sentiment thing, after all) setups like those shown below should not be ignored. We are talking historic in silver and merely compelling in gold.

Continue reading The Bullish CoT Setups in Gold and Silver

DJIA/Gold Ratio

By Tom McClellan

DJIA/Gold Ratio

Every chart of price data is a depiction of a ratio.  If you look at a chart of your favorite stock, what you are really looking at is the ratio of the value of your stock to the value of the dollar, since stock prices are quoted in dollars.  AAPL recently was at 226 dollars per share.  Gold recently is at 1200 dollars per ounce.  Every price is a ratio.

But you don’t have to have currency in a ratio.  The value of the DJIA is an approximation of dollars per something; I won’t discuss the merits of that index’s construction here.  But if you take the DJIA’s “dollars per something” and compare it to gold’s “dollars per ounce”, you can factor out the currency and get a ratio of “something per ounce”.  Again, don’t get me started on what the DJIA’s value means.

Continue reading DJIA/Gold Ratio

Deutsche Bank Bottom?

By Kevin Muir

It’s been a while since I have posted, so I will ease in with a short and simple one.

When talking to credit managers, I always ask for names that they are avoiding. More times than not, one of the companies mentioned is Deutsche Bank. Credit managers either feel it is too complex to value, or they do not trust the markings of the smorgasboard of derivatives that decades of unrestrained capital market share growth has brought.

After all, we are talking about the firm audacious enough to buy Bankers Trust. I am old enough to remember when Bankers was the firm when it came to complex derivative products.

Continue reading Deutsche Bank Bottom?