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
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
By Tom McClellan
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
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?
By Tim Knight
The unraveling continued overnight with the market leader Bitcoin………
It still has a fairly solid shelf of support around $6,000. A clean break of that level would, I suspect, freak the HODLrs out, in spite of their moniker.
Continue reading Keeping Up With the Cryptoshians
By Charlie Bilello
US manufacturing is booming.
In a report released this week, the ISM Manufacturing Index moved up to 61.3, the second-highest level in the last 30 years.
Data Source for all charts/tables herein: FRED, Bloomberg
Many are saying that’s great news for the stock market because increased manufacturing activity is evidence of a stronger economy. This seems logical but does the data support such a conclusion? And is it prudent to use manufacturing indicators to time your exposure to stocks.
Let’s take a look…
Continue reading Do Stocks Perform Better When Manufacturing Is Booming?
By Jeffrey Snider
Private US businesses are not building new facilities, or renovating old ones, at a rate that suggests the economy is doing well. Let alone booming. For more than two years now, the aggregate level of Private Non-residential Construction Spending has been flat.
According to the Census Bureau in figures released today, construction capex in July 2018 (seasonally adjusted) was less than 2% above what took place in July 2016. Compared to November 2016, there was less spending in the latest month than during the height of Reflation #3.
Continue reading Capex and Taxes; What The Corporate Sector Is Saying About the Economy
By Callum Thomas
Studying historical averages can produce useful and interesting insights on the market. Looking at the historical average level of the VIX we can see that the CBOE Volatility Index tends to be higher around this time of the year. We showed elsewhere that this tendency is also mirrored in US high yield credit spreads (which makes sense as they are both basically market measures of risk pricing). The key conclusion then is that there is a decent chance, based solely on historical seasonal patterns, that the VIX heads higher over the coming weeks. There are always exceptions to historical average rules, but it is something to consider given the global macro risk backdrop (stress in EM, Fed tightening, political risk, softer global growth pulse).
Continue reading Chart: Tis the Season for a Higher VIX
By Anthony B. Sanders
What kind of bear is best? The kind that doesn’t happen!
But alas, the Goldman Sach Bull/Bear index is signalling a possible bear market.
“Low unemployment … and strong growth momentum at such an advanced stage in the economic cycle would normally already be associated with higher wages and, consequently, higher inflation and tighter monetary policy,” Goldman Sachs strategists said.
But “it is because of the lack of inflation that some of these variables can appear stretched without ringing alarm bells for equity investors. Put another way, it is very unlikely that without core inflation rising much, policy rates will rise sufficiently in the US or elsewhere to invert yield curves and/or force a recession in the near future,” the strategists said.
It doesn’t mean the bull market will end soon. But after a 9 1/2-year rally where the S&P 500 rose 19 percent annually, investors should be prepared for lower returns in coming years.
Continue reading Bull-Bear Index At Highest Since 1969 (What Kind Of Bear Is Best?)
By Anthony B. Sanders
Non-commercial shorts for gold and silver have hit the highest levels … ever!
Actually, Silver shorts hit an all-time high and gold shorts are down slightly since yesterday.
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By Evan Hurst
Are we still liveblogging the Brett Kavanaugh confirmation hearing from hell? WE ARE. But because we are a badass who can write two blog posts at the same time while also drinking all the wine for Wine O’Clock, we need to direct your attention to the new HOLY SHIT Washington Post preview of Bob Woodward’s new book Fear, which is about the fear that should grip every patriotic American when they consider the fact that Donald Fucking Trump is president of the United States.
Remember how apeshit Trump went over Fire & Fury? Yeah, well, the portrait here is WAY worse. Let’s look at some highlights!
The stuff about Trump’s former lawyer John Dowd!
Remember how John Dowd used to be the only real lawyer on Donald Trump’s team, but even he was kind of a big idiot? Anyway, he quit-fired himself from the Trump team back in March, after a wild and crazy weekend of emailing Daily Beast reporters crazy messages in purple comic sans (for real).
But before that, back in January …
Continue reading The 445,672 Most HOLY FUCKING BATSHIT Moments In Bob Woodward’s New Trump Book (SO FAR!)
By Keith Weiner
This week, we are back to our ongoing series on capital destruction. Let’s consider the simple transaction of issuing a bond. Party X sells a bond to Party Y. We will first offer something entirely uncontroversial. If the interest rate rises after Y buys the bond, then Y takes a loss. Or if the interest rate falls, then Y makes a capital gain. This is simply saying that the bond price moves inverse to the interest rate.
However, it is highly controversial for some reason, to note that X is on the other side of the trade. If Y takes a loss then it is X’s gain. If Y makes a gain, then it is X’s loss. Party X is short the bond, and Party Y is long. When the price of an asset moves up, shorts lose and longs win. When it moves down, shorts win and longs lose.
Continue reading Illicit Arbitrage Cut by Tax Cuts and Jobs Act, Report 3 Sep 2018