donderdag 20 juni 2019

"Powell Throws In The Towel": Gold, Global Stocks Soar, S&P At All Time High As Yields Tumble!

Risk assets, safe havens? It doesn't matter: just buy it all as central banks enter the last stretch of the race to the (credibility) bottom. The global dovish tsunami, still in its jawboning phase - which was started by Mario Draghi on Tuesday and escalated on Wednesday when Fed chair Powell finally threw in the towel and effectively said he would cut rates in July, has resulted in a global scramble for both risk assets and safe havens, with global equity markets a sea of green...


S&P500 futures at all time high, indicating a record S&P print when the cash market opens...


Even as the 10Y Treasury yield plunged overnight, dropping below 2% for the first time since November 2016 and reaching as low as 1.97% before rebounding...


Finally, the ultimate safe asset, gold, has surged 1.5% overnight, and has finally broken out above multi-year support as we noted last night...


The rest of the world joined the party, with Europe's Stoxx 600 Index boosted by gains in technology shares and carmakers. Just like in the US, European stocks and bonds rally simultaneously in the aftermath of the Fed’s dovish tilt yesterday. Euro Stoxx 50 +0.9% to highest since May 6, led by technology, autos and industrials. In rates, Euro-area yields were steady to 4bps lower across the 2-yr through 10-yr tenors, with 10-yr BTPs outperforming bunds by 6bps.
# Earlier in the session, Asian stocks also climbed, heading for their best week since January. The MSCI Asia Pacific Index rose for a third day, with communications and finance among the best-performing sectors. Most markets in the region were up, as China and Hong Kong led gains. Chinese stocks rallied the most in Asia with a surge in large caps as risk appetite picked up around the world. Investors adjusted positions before FTSE Russell is set to add A shares to its global indexes for the first time. The Shanghai Composite Index closed 2.4% higher, with Kweichow Moutai and large financial firms offering the biggest boosts, after Chinese President Xi Jinping began a state visit to North Korea. A rally pushed the price of gold surged to the highest level in more than five years, sending shares of gold miners across Asia higher. The Topix gauge advanced 0.3%, driven by SoftBank and Nintendo.
# In the latest central bank news:
* Norges Bank, busy building a reputation as one of the world’s most hawkish central banks , unanimously delivered on the promised 25bps June hike, with the Key Rate now at 1.25%, as expected.” Governor Olsen highlighted that the “assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of 2019”, with policy forecasts signalling faster rate rises in the coming years. In-fitting with some of the calls, the rate path was left unchanged from the March release.
* The Bank of Japan kept monetary policy unchanged Thursday,
* Indonesia’s central bank signaled it’s ready to cut interest rates.
* The Philippines central bank kept its key rate unchanged.
* RBA Governor Lowe said the possibility of lower rates remain on the table and that it is not unrealistic to expect a further reduction in the Cash Rate. RBA Governor Lowe also commented that recent data suggests we are not making any inroads into the economy's spare capacity and it is unrealistic to think one 25bps cut can alter the growth path, while he also suggested that it is important to recognize monetary policy is not the only option and that he is very hopeful we will not need to cut as far as some central banks in Europe. (Newswires)
* The Bank of England kept rates unchanged but warned that the risk of a no-deal Brexit is rising, sending cable sliding.
# In FX, the Bloomberg USD index tumbled -0.5%, its biggest drop since March 20, as a fresh round of leveraged and real money selling after the London open kept the greenback under pressure. Norway’s krone rallied as Norges Bank signaled its rate hike Thursday may be followed by a similar move later this year, while sterling rose above $1.27 before the Bank of England policy decision.
# In the biggest geopolitical news of the day, the Iranian Revolutionary Guard shot down a US drone according to reports citing the state news agency, although the US military later stated that no US aircraft had operated in Iranian airspace. Iran's Revolutionary Guard Corp Top Commander Salami says the the downing of the US drone sent a clear message to Washington, according to State TV.
# In commodities, both Brent ($63.26) and WTI ($55.21) rally as Mideast tensions ratchet up, with gold jumping to the highest level in more than 5 years....

Sterling Slides After BOE Keeps Rates Unchanged, Sees Rising No-Deal Brexit Risk

In a break from the global easing tsunami that has swept the world in the past 48 hours, moments ago the Bank of England did not cut rates, as expected, in a unanimous 9-0 decision.
* Bank of England @bankofengland MPC voted unanimously to keep #BankRate at 0.75%  pic.twitter.com/ViqS4Zwe3G 
# The MPC noted that near-term data has been broadly in-line with projections made in the May report, however, downside risks to growth have increased; the bank also said that global trade tensions and especially the increasing risk of a no deal Brexit: “Domestically, the perceived likelihood of no-deal Brexit has risen,” the bank said in a summary of monetary policy. Today's announcement follow a May report in which the BOE indicated that more rate hikes would be needed over the next few years to keep inflation under control, and said the market curve doesn’t reflect that. Since then investors have increased bets in the other direction, with the market showing a greater likelihood of a cut rather than an increase as the next move.
# The market moves “highlighted the ongoing tension between the MPC’s forecast conditioning assumption of a smooth Brexit and the assumptions about alternative Brexit scenarios that were priced into the financial market variables,” the minutes said. While Mark Carney's central bank said it still sees the need for interest-rate hikes in coming years if the forecasts bear out, they also said that investors are taking a different view than the bank’s assumption of a smooth Brexit. That pressured the pound and market expectations for future interest rates, the Monetary Policy Committee said in the minutes of its June meeting. The pound declined after the report while UK equities jumped...

Doubtful ECB Can Prevent Recession, Former IMF Chief Economist Warns

European equity and credit markets have exploded higher on the heels of Mario Draghi's "whatever it takes" double-down this week, former IMF Chief Economist, Olivier Blanchard spoke to CNBC Europe, pouring some rational cold water on the exuberant market sentiment; "I'm sure they'll do whatever they can, but whether it has major effects on the real economy, I am doubtful. I am nearly sure that the ECB, by itself, cannot right a recession. It will need help, it's fairly obvious."
* When asked if the world's central banks have enough ammunition, Blanchard once again reflects pessimistically, noting that: "they have a lot of ammunition, the question is how much it kills, because they can buy assets in very large quantities but the fact is at this stage it has very little effects on the rates and thus the economy]which is all that matters in the end."
* Blacnhard does have a solution, however; "Monetary policy needs help, from fiscal policy, we can do a few other things like structural reforms but they don't do any good in the short-run, I think the central banks need help."
# The only problem with the IMF chief economist's view is that policymakers will do nothing until the crisis "of bad numbers" actually occurs, warning that "Germany, who has been set in their frugal ways, will have to give in." Makes you wonder if buying European stocks and credit was so smart after all eh?

Market Update

# The Fed didn't cut rates but their bias looks changed and a July cut looks likely if economic data stays on a weakening path. As said, we bought the post-Fed low and added to our PM sector positions. Gold is breaking higher out of a 5-yr H&S bottoming pattern and is testing $1400 Thursday night. Our bias is that we made a major low on the 6/3 New Moon and we are on our way to SPX 3100 by August. The SPX looks bullish and should make new all-time highs going into Friday's expiration...


# The SPX pulled back in just an EW a-b-c from Tuesday's high to the post-Fed low. We view this as bullish and look for higher highs on Thursday. The idea that the Fed may cut rates in July and the hope of a China trade deal next week at the G-20 should propel the SPX higher into Friday's triple witching expiration...


# Global markets are all about liquidity here and we have long predicted that the Fed will shift back to an easing stance at some point this summer and this should help propel the SPX to new all-time highs despite trade wars with China, the EU, Mexico and a slowing global economy. The US Fed is signaling that it is prepared to ease in some fashion this summer, but the exact timing is still an issue.
# After tracing out a double bottom last week, crude oil reversed higher in yesterday's Full Moon Timing Window and could test $56 soon.
# In the afternoon electronic session gold ran higher to $1366, a rally high, and then in the evening session is testing $1400; A MAJOR BREAKOUT. We are seeing some massive short-covering from the COT commercials.
# Silver formed a bullish pennant on the hourly chart and is following gold higher to test $16.10 in the next few days.
# The USD is declining impulsively below 97; this should help support / boosting gold and crude oil....

IceCap: Every Fed Chair Has A Plan, Until...

# Send In The Clowns. Unknown to many, threading the needle is also being attempted in the high stakes game of global finance. Leaders at the world’s central banks are all trying to steer their domestic economies through a small opening while avoiding the pitfalls created by a lifetime of excessive borrowing and ill-fated policy responses. In the minds of these financial maestros, they have the tools, the doctorate degrees and the blessings of governments to thread the financial needle. In an effort to resolve any financial crisis, the world’s central banks have always tried to thread the needle by changing interest rates and/or changing the amount of money in the system. The central banks and their supporters all claim that only through their actions, was a serious crisis resolved allowing everyone to live happily thereafter.
# What the central banks and their supporters do not tell you, is that the actions to save one crisis, have always sowed the seeds for the next crisis. In the minds of investors with common sense and objectivity, we expect the exact same outcomes that have occurred every other time central banks tried to thread the needle. After all, expecting anything else would be the classic definition of insanity. The needle is a sharp tool. Yet, if the user is not careful, a simple prick can cause an awful lot of damage. Unfortunately for most investors, the majority of the investment industry either refuse, are unable or simply not allowed to share with investors how all financial events are linked together. And what is even more alarming, the industry is once again shepherding investors into the very markets that are about to experience the after-effects of central banks once again trying to thread the needle.
# The Needle. The foundation necessary to truly understand the movements of global capital markets is knowing the USD is the world’s reserve currency. And by default, financial actions by the US Federal Reserve affect the entire world. This of course is quite different from every other central bank in the world. The actions of central banks in every other country primarily affect their local, domestic economy only. Actions by the Bank of England are never talked about by the Japanese. Whenever the Reserve Bank of Australia makes a significant change, it won’t even cause a yawn in Brazil. The Bank of Canada is an unknown entity to the Americans. Meanwhile, it is true that the European Central Bank (ECB) is more widely known around the world. Yet, it is also true this fame has been achieved due to clownish-type behavior from the supposedly sharpest financial minds in Europe, not due to their actions causing ripples in international economies. The US Federal Reserve however is a different story. And despite anyone's subjective feelings towards America’s current debt, fiscal, political, or social states; understanding and respecting the power of the Federal Reserve and the USD is paramount to your financial success and security. To better appreciate how and why the US Federal Reserve is the Financial Needle of the world, one needs to simply observe the actions and reactions in the recent past. Let’s first start in 1996 Asia, and what was sold as the Asian Miracle...


# The economic hitman. In the mid-90s, investors everywhere were screaming for opportunities to invest in the roaring tigers. I started my career during this time, and I was instantly attracted to the Asian Growth Mutual Fund which just finished the year up +86%. Asking my mentor at the time whether clients should still invest in this fund, the fella responded “even if the fund does ¼ of what it did last year, clients will still make 20%+.” Three years later, this happened...


This was my first real lick of a financial crisis and it didn’t taste good. It turns out, the Asian Miracle was no miracle at all. Instead it was simply the powerful concoction of exponential domestic borrowing, combined with a flood of foreign investment. This combination can only cause markets to go in one direction – and that’s up. Of course, when capital starts to leave, the opposite is also true. And this is where the US Federal Reserve came into play. In early 1997, the US Federal Reserve increased overnight interest rates by 0.25%. Now on the surface, this tiny increase may not seem like the tiger killer, but it was. In fact, it was just enough to frighten stock markets. And just enough to get the first wave of foreign investors to begin withdrawing their capital from the by now, very debt heavy Asian region. And just enough for them to reallocate their capital to America. It was this first outflow of foreign capital that really loosened up the olives in the jar. And as you know, once that first olive moves, the rest tumble out very quickly. At the time, the US Federal Reserve was trying to somewhat reduce the extreme level of exuberance in US stock markets. What it actually managed to reduce was the entire Asian currency and bond markets...


# Y2K. Of course, not only did the Fed manage to deflate an entire continent; the turmoil from Asia spread to Russia, and then ignited the collapse of not only the Russian Ruble, but also the New York based hedge fund, Long Term Capital Management (LTCM). Unknown to most of the world, LTCM was levered to the hilt and completely riding the coat tail of continued prosperity in Russia... To refresh, the collapse of Asia caused the collapse of Russia which caused the collapse of LTCM. Which nearly caused the collapse of the Wall Street titans including Morgan Stanley, JP Morgan and Goldman Sachs. This was all ignited by the Federal Reserve believing a 0.25% rate hike would only affect the local US economy and financial markets. To clean up this financial mess the Federal Reserve sprang into action and did their thing, it would once again try to thread the financial needle to save the day and right the ship. In 1998, the Fed began to reverse its previous rate increase and proceeded to cut rates from 5.50% all the way down to 4.50%. It turns out, the Federal Reserve didn’t thread the financial needle at all. And in fact, the only thing it did was to provide the foundation to once again encourage excessive borrowing and investment. But this time, instead of foreign capital moving out of America, it stayed right in America and found a home in the technology sector. At this point, we don’t know what is more frightening, the fact that we (and many others) can vividly recall the days of the infamous Tech Bubble splattering against the wall, or the fact that nearly 50% of today’s investment industry is too young to remember or too young to have experienced this financial moment in time...


# Monetary cocktail. For those who want to reminisce, the days of Pets.com, JDS Uniphase and Nortel were certainly a scene. But what is lost upon those who lived (and then lost) the dream, was the fact that to save the world from the collapse of the Tech Bubble, the Federal Reserve once again tried to thread the financial needle. This time, Alan Greenspan and his soothsayers at the Federal Reserve knew things were not only wrong, but very wrong. And when things are very wrong, the Federal Reserve did something they had never done before, they reduced interest rates all the way from 6.50% down to 1.00%. And to put the financial cherry on top, it stayed that way for nearly 5 years. Put another way, the global financial system received such a jolt from the breaking of the Tech Bubble, the Federal Reserve had to provide more stimulus than what was ever provided in financial history. Of course, this record would be shattered again in less than 4 years. Notice how each financial crisis, required increasingly more financial stimulus to bailout the losses and help the world get back on track.
# Also notice the pattern, every single time a crisis occurred, it was put in motion by central banks and their reaction to the previous crisis. Understanding this, it should be incredibly clear to everyone that the seeds for the next crisis have already been planted, the crisis has already started to grow, and nothing is standing in its way. To complete our stroll down financial memory lane; understand that the 2008-09 Great Financial Crisis was completely enabled by the US Federal Reserve. The Fed’s reaction to the Tech bubble by keeping interest rates at 1.00% for 5 years was the breeding ground for all of those low-cost mortgages, and ultra-excessive product creations by the Wall Street machine. And the losses, shocks and paralysis from the 2008-09 crisis was so severe, the Federal Reserve and other major central banks responded in a way never before seen in our lifetime. First they bailed out entire banking sectors. Next, they lowered interest rates to 0%. Then they proceeded to print over $14 Trillion dollars. Finally some central banks (Japan, Eurozone, Switzerland, Denmark, and Sweden) cut interest rates below 0%, or put another way, they created NEGATIVE interest rates. Collectively, this monetary cocktail has been brewing for 10 years.
* European bank stocks are down 80% since 2008 and now back at levels first reached in the 1980s...


# History rhymes. For many, 10 years can be a blink of the eye. For others, 10 years can seem like a long time. For the US Federal Reserve, 10 years of 0% interest rates combined with money printing is a lifetime. Put another way, the Federal Reserve knew they painted themselves into a corner and they had to get out. The first step with getting out of the corner involved putting an end to money printing. The second step focused on attempting to raise interest rates up towards normal levels. And the third step was beginning to unwind (or bringing back in) all the money it printed. Chart below shows all 3 steps. Notice how it took a full 3 years for the Federal Reserve to transition from ending the money printing program (QE) to actually beginning to unwind the money printing program (QE). Also notice, it took the Federal Reserve 1 full year between raising rates in December 2015 to again in December 2016...


# Everyone has a plan, until. The reason it took so long to begin going down this slippery slope was due to the reaction of markets outside of the US. Time and time again, whether it was Chinese markets, or emerging markets as a whole - the mere mention of the Federal Reserve ending QE, raising interest rates and unwinding its balance sheet caused tremors across these markets. Note the similarities with the Asian Crisis in 1996. For investors, these actions by the Federal Reserve signalled a removal of stimulus, and equity investors and the talking heads gobbled excessively about the risk of stock markets crashing. Yet, while most were preoccupied with the stock market story, something else of even more importance was happening. The Fed Reserve’s actions of reducing its balance sheet and raising interest rates was slowly but surely causing foreign capital to move back into US Dollars. And a world with less USD in circulation is a world that creates market stress, fragile currencies and deteriorating government fiscal positions. While we have no sympathy for the Federal Reserve, we do have empathy for the Federal Reserve. To be clear, they were damned if they stopped printing money and raised interest rates, and they were damned if they didn’t stop printing money and raised interest rates. But that’s why they get paid the big bucks (from book deals after they leave the Fed)...


# Enough of the history lesson. Let’s now turn to what will happen in the future, and when it does happen, it will be historic. Read on....

Gold Spikes To 6Y Highs As Dollar And Bond Yields Plunge

The 10Y US Treasury yield is now down 11bps from the FOMC Statement, plunging back below 2.00% for the first time since November 2016, erasing almost the entire move since President Trump was elected...


Citigroup sees 10-year Treasury yields falling to about 1.65% by year’s end as the Federal Reserve cuts interest rates up to three times to boost U.S. economy, senior technical strategist Shyam Devani tells Bloomberg.
* “Yields have been falling across the curve, and this has been something you haven’t been able to fight,” Singapore-based Devani said by telephone. “You’ve got a Fed that’s now changed its language and we’re on a path where there’s going to be rate cuts ahead, whether it’s two or three times, it’s hard to say, but there will be cuts. It’s a combination of things driving this including a slowing global growth environment, trade tensions and low inflation.” 
# 30Y is also extending its gains, with the yield dumping to 2.50%, erasing all of the post-Trump growth move...


Gold has spiked up to almost $1400...


Its highest since September 2013 Gold in Yuan is also breaking out to 6 year highs...


The Dollar is extending its losses...


And the jaws of death keep yawning wider. Something's gotta give (reminder, Friday is quad witch)!

Simon Black; Rejoice, The End Of Banking Is Nigh

# On January 3, 2009 the Bitcoin blockchain came into existence. 50 bitcoins were mined by the network’s creator in that very first transaction. And within a few days, the first open-source Bitcoin software was released. Few people noticed. By October of 2009, the value of a single Bitcoin was still just $0.0009 (9/100th of a penny). A decade later, Bitcoin has seen a 10,000,000x increase and triggered perhaps the most spectacular financial bubble in human history. For the next few weeks I plan on writing about how the world has changed over the last decade and I thought it was an appropriate opportunity for reflection. Ten years of cryptocurrency has been a wild roller coaster. In 2009 few people had heard of it.
# Today, most of the world knows about Bitcoin. Tens of millions of people have bought some. And a fair number of those have been burned. The 2017 bubble saw the Bitcoin price rise from less than $1,000 in January to nearly $20,000 by the end of the year. It was a classic bubble mentality, people threw money at something they didn’t understand based solely on an uninformed belief that the Bitcoin price would keep rising. And no one wanted to miss out. Some people even went into debt and mortgaged their homes to speculate in cryptocurrency. By the end of 2017, there were far more cryptocurrencies than fiat currencies, not to mention innumerable ‘tokens’ and ICOs that had taken place. It got to the point that anyone under the age of 30 who could write a White Paper was able to raise a few million dollars through an ICO. By the middle of 2018, most cryptocurrencies had been left for dead. But now there are real signs of life: just yesterday, Facebook announced details on a cryptocurrency that they have been developing for more than a year. They’re calling it the Libra. It’s quite a bit different than most existing cryptocurrencies like Bitcoin: Libra is less decentralized. It’s backed by fiat currency.
# It has already attracted huge partners like Visa, the same types of companies that early cryptocurrency developers hoped to displace. But out of everything in the marketplace, Facebook’s Libra is the only cryptocurrency that could have global, mainstream appeal. Within the next 12 months there could be hundreds of millions of users worldwide sending payments to one another as easily as sending an email, or using their Libra to buy coffee at Starbucks. I doubt this is the end of the road, either. While I’m wary of Facebook, I believe Libra will likely serve as a catalyst, opening doors for more interest, more development, and better applications of the technology. One thing is certain, banks are in big trouble. They’ve had a monopoly on our money for thousands of years and have abused this trusted privilege countless times. Today, the primary functions of banks,  holding deposits, making loans, payments & transfers, and exchanging currency, can all be done better, faster, and cheaper outside of the banking system. There are already plenty of Peer-to-Peer websites where borrowers and lenders can arrange their own loans. And even more ways to send money, make payments, and exchange currency, from older establishments like Western Union to newer ones like Google Wallet, TransferWise, and PayPal.
# Facebook’s Libra represents a direct threat to the banks’ sole remaining monopoly, holdings customer deposits. We already have a few alternatives for holding our savings, including physical cash, short-term government bonds, gold, crypto, etc. But with Libra, people will have an easy, mainstream option to hold their money, as well as make transfers and payments. They won’t really need a bank account any longer. Just in the same way that a lot of people stopped signing up for home telephone lines in favor of their mobile phones, it’s now much more realistic that people (especially younger people) will forgo bank accounts for their crypto wallets. This is an enormous change from where we were ten years ago. Over the past decade crypto has seen its genesis, bubble, collapse, and resurgence. And now there’s finally a catalyst to mainstream use that poses a direct threat to banks’ financial dominance. It’s about time.
# If you are interested in speculating in Cryptocurrencies, I encourage you to download our free Crypto Currency Report, A Different Perspective on Crypto. More and more people want to dive into crypto currencies and everyone’s focus is on Bitcoin’s price. But, the price is not what matters. I see so many people make the same wrong assumptions and mistakes that could be fatal to their capital. That’s why my team and I have written this special report where I share a different perspective on cryptocurrencies....

Krieger: 'FacebookCoin' Is A Trojan Horse Of Corporate Oligarchy

* From Matt Stoller’s recent article, Facebook’s Undemocratic Currency; Years ago, Mark Zuckerberg made it clear that he doesn’t think Facebook is a business. “In a lot of ways, Facebook is more like a government than a traditional company,” said Mr. Zuckerberg. “We’re really setting policies.” He has acted consistently as a would-be sovereign power. For example, he is attempting to set up a Supreme Court-style independent tribunal to handle content moderation. And now he is setting up a global currency...


# For a long time, I’ve maintained there’s no doubt the current system/paradigm we live under will collapse under its own weight, but that doesn’t keep me up at night. What keeps me up at night is understanding we still have no idea exactly what will replace it. It could very well be a more decentralized and free world, a world less defined by brute force, grotesque power concentrations and coercion, but it could also very easily go the other way. The coming out party for FacebookCoin (aka Libra) is in my view the first real indication the forces of corporate oligarchy are determined to ensure the new world reflects their vision and is under their control. Though I’ve seen many thoughtful and important articles on the dangers of Facebook and a consortium of large corporations building a new financial system in broad daylight, I have yet to see anyone explain precisely what seems to be going on. I think the level of strategic long-term thinking happening here is more extensive than even the most cynical observer is willing to contemplate. This looks like a power play of monumental proportions.
# I’ve come to view Mark Zuckerberg as a strategic genius with zero ethics. In other words, he probably has a plan beyond your field of vision and you can’t take anything he says at face value. This is how we’ve seen him operate within Facebook and via the various wildly successful acquisitions he’s completed over the years, most notably Instagram and WhatsApp. You don’t have to be Nostradamus to see that the current global financial system is failing and won’t be around as currently structured much longer (years not decades). Nowhere is this more apparent than in the fact that negative yielding global bonds just pushed back into record territory at $12.5 trillion.
* Eric Pomboy @epomboy Market Value of Global Negative Yielding Debt jumps $714.4bln yesterday to RECORD HIGH $12.47 Trillion pic.twitter.com/Nrj...
# If I can see where this is headed, Zuckerberg and his top team at Facebook can see it too. As such, I view FacebookCoin as the corporate oligarchy’s first serious attempt to position itself to be chieftains of a key segment of what will be the financial system(s) of the future.
* Michael Krieger @LibertyBlitz is exactly why I think the fiat “backing” is a Trojan horse. He’ll drop the backing as soon as it’s convenient and attempt to make FacebookCoin the global currency of surveillance capitalism, “backed” by all of your private information. https://t.co/tZ2...
# I do not think Zuckerberg’s ultimate goal is running a stable coin, although he could live with that arrangement and benefit from it for as long as necessary. I think the main reason Facebook has structured the coin with fiat backing is to make it seem less threatening to the current monetary establishment and world governments. It’s a way of saying Facebook isn’t trying to compete with the current status quo, but rather make the status quo run more smoothly and efficiently. Then, once it has a foot in the door and gains traction amongst its massive user base, all Facebook has to do is wait until the current assortment of global governments and their respective central banks fail. At that stage it can remove the fiat currency backing (who will want it anyway), and let FacebookCoin free float. With the credibility of global governments and central banks in the toilet by then, Facebook and its corporate oligarch partners will be in a prime position to take over a sizable chunk of worldwide payments using their own currency. In other words, this appears to be a long-term scheme by elements of corporate oligarchy to position themselves as an unelected and unaccountable future sovereign power.
# All that said, I want to be clear about something. Just because the above represents a plausible scenario doesn’t mean it’ll work out that way. If enough people recognize the dangers of this scheme, it could very well be stopped in its tracks. In this regard, I want to highlight one of the biggest threats posed by a financial system run by a corporate oligarchy. For one thing, there’s the ever-present issue of censorship. I understand why many in the “crypto” world are fine with FacebookCoin since they see it as a threat to state power and control, but this is myopic in my view. Let’s not forget who is silencing the voices of Americans online in 2019. It’s not the state, but rather Facebook, Google, Twitter, etc. If we allow these companies to gain control of payments, you can be sure the same sort of unaccountable blacklisting will follow in the world of transactions. Zuckerberg wants to do with money and payments what he’s already done with speech.
* Michael Krieger @LibertyBlitz He wants control of what you can do in the most fundamental areas of human freedom: communications and money. Allowing any person or company this sort of control is absolute insanity...
# Also, similar to what many of the tech giants have done with speech, Facebook could easily team up with governments or government linked deep-state type entities to stop transactions or freeze the accounts of “problematic” citizens. It would be a very convenient way to get around the rule of law in a place like the U.S., and would represent a perfect symbiotic relationship of tyranny between what could at that point be a vestigial state apparatus and empowered tech giant oligarchs. Ultimately, what’s going on here gets at the crux of everything I’m trying to discuss at Liberty Blitzkrieg. Namely, that the old world is dying and the most important thing that’ll occur over any of our lifetimes is the sort of world we create, or allow to be created, in its wake. The launching of FacebookCoin represents one segment of corporate oligarchy throwing its hat in the ring, and a very dangerous one at that given the already existing dominance of tech giants in the communications realm. From my perspective, communications and money are two aspects of human existence so fundamental to liberty they should remain as free and uninhibited as possible. To trust these things to a collection of billionaires and their corporations would represent the pinnacle of short-sightedness and insanity.
* mBit @mdotbit The Whitepaper 18/Jun/2019 Dumb fucks on brink of trusting me second time....

Most Splendid Housing Bubbles In Canada

Vancouver housing bubble sags. Toronto down 3.4% from peak. Calgary and Edmonton back to 2007. Montreal sets new record. National index ticks up the least for any May in 21 years of data. Home prices across major metros in Canada ticked up 0.5% in May from the prior month, the slowest rise for any May in the 21-year history of the Teranet-National Bank House Price Index. “If seasonally adjusted, the index would have been down 0.4% on the month,” the report said. But real estate is local, with wide variations from market to market, and so here we go.
# Vancouver: In Greater Vancouver, house prices, instead of rising seasonally, declined 0.2% in May from April, the 10th month in a row of declines, according to the Teranet-National Bank House Price Index. The index is down 5.0% from the peak in July 2018, the sharpest 10-month decline since July 2009. And it’s down 4.1% compared to May 2018...


Vancouver was one of the most splendid housing bubbles the world has ever seen as prices more than quadrupled in 16 years, skyrocketing 316% from January 2002 to the peak in July 2018. But this splendid bubble has developed some serious leaks. The Teranet-National Bank House Price Index tracks single-family house prices, based on “sales pairs.” It compares the sales price of a house in the current month to the price when the same house sold previously, often many years earlier. The methodology of “sales pairs” eliminates some of the issues associated with median-price indices, which for Vancouver are pointing at much steeper price declines. In the US, the S&P CoreLogic Case Shiller index also uses the “sales pairs” method, so we can compare the data for the Vancouver housing bubble to the San Francisco Bay Area housing bubble to see which is the most splendid, in one chart, with Vancouver as black columns and the San Francisco Bay Area as red columns, and with both indices converted into “percent change from January 2002.” Note how Vancouver’s housing market only dipped during the big-bad Financial Crisis while San Francisco’s slumped deeply for four years...


# Toronto: House prices in the Greater Toronto Area (GTA) rose 0.7% in May from April, according to the HPI, and are up 2.6% from May last year, but remain down 3.4% from the peak in July 2017. Despite minor ups and downs, the index has been essentially flat since July 2018. Over the 15 years from January 2002 through the peak in July 2017, house prices more than tripled, with the index soaring 218%. But Toronto cannot hold a candle to Vancouver, where prices had quadrupled over the same period. For perspective, all charts here are on the same scale. Hence, Toronto’s chart shows more white space...


# Winnipeg: House prices in the Winnipeg metro area ticked up 0.5% in May from April, after a hard 2.0% drop in the prior month, according to the HPI. The index is down 3.7% from the peak in September 2018. This took the index back to where it had first been in August 2016. In the Winnipeg metro, which is surrounded by lots of land and I mean on an epic scale, house prices had nearly tripled in the 12 years between January 2002 and the peak in September 2014, with just a hiccup during the Financial Crisis. Since September 2014, house prices have stalled however, and with the decline over the past six months, they’re now up only 2.5% from where they’d first been nearly five years ago...


# Montreal: For the metropolitan area of Montreal, the House Price Index rose 0.5% in May from April to a new peak. The index has risen 160% over the past 16 years, not even dipping during the Financial Crisis. While this surge would have been huge by just about any standard, it’s only about half of the Vancouver mindblower over the same period. Hence, the white space is beginning to dominate the chart...


# Quebec City: House prices in the Quebec City metro rose 0.8% in May from April, continuing their mild ups and downs that have kept the index essentially flat since July 2014, after a white-hot 160% gain in the 12 years from January 2002 through July 2014... # Edmonton: Canada has two major oil towns, Calgary and Edmonton, whose economies are dominated by oil booms and busts, and housing too follows oil. The prior oil boom caused house prices to skyrocket 87% from June 2005 through October 2007. Just nuts! This bubble promptly collapsed, and house prices are still not back where they’d been 12 years ago, and declined again in May, despite what should have been a seasonal increase. The HPI is down about 6% from its peak in October 2007 but thanks to the glorious bubble in 2005-2007, it remains up 136% from January 2002...


# Calgary: Oil booms and busts, always. House prices in the Calgary metro ticked up 0.3% in May from April, but remain down 7% from their peak in October 2014, and are back where they’d first been 12 years ago in July 2007. The HPI has gained 123% since January 2002, compared to Vancouver’s 316% gain...


House price movements that are measured by comparing the price of the same house as it changes hands over time, “sales pairs” method, such as the Teranet-National Bank House Price Index in Canada or the S&P CoreLogic Case Shiller index in the US, in fact measure how many dollars it takes to buy the same house over time. When the price of the house doubles, it’s not an indication that the house got twice as big or twice as opulent, but that the dollar has lost its purchasing power with regards to the same house, and it now takes twice as many dollars to buy the same house. And so these indices are good measures of house price inflation, similar to indices that measure consumer price inflation....

Wolf Richter; Brick-And-Mortar Meltdown Gets Costly For Big Retailers

Ecommerce and the globalization of retail crush distribution channels, wholesalers, local retailers, large retailers, prices, and margins. Transcript of my podcast on Sunday. You can listen to my podcasts on YouTube. Walmart, Macy’s, Best Buy, Home Depot, Nordstrom, etc, they all spend vast sums of money building out their ecommerce sites and their fulfillment infrastructure. And the big lump-sum figures are starting to show up in their regulatory filings. Other major retailers didn’t take the threat of ecommerce seriously, and didn’t have the funds to take it seriously, as they were squeezed by the private-equity firms that owned them, and just put up a website, hoping for the best: Many of them have gone bankrupt. This includes notably, Toys R Us, Sears and Kmart, Bon-Ton Stores, Borders Books, Claire Stores, Sports Authority, Limited Stores, and Payless Shoe Source. 
# Now the brick-and-mortar survivors are scrambling furiously to get on top of this existential threat that many had blown off for years as irrelevant to their business, thinking that this whole ecommerce thing was overblown, and that ecommerce is only a small part of retail, that it was too small to worry about, etc. etc. And they’re spending vast sums to get on top it, often belatedly as in Walmart’s case. Some of them are doing it successfully and have become formidable ecommerce competitors, as their own brick-and-mortar business is more or less gradually falling by the wayside. Ecommerce is not just Amazon. It’s every online retailer out there, including the tiniest mom-and-pop operations. It’s manufacturers selling directly to consumers. In fact, it’s manufactures in India or China selling directly to US consumers as third party-vendors on platforms such as Amazon, Alibaba, eBay, and others. The entire world is trying to sell directly to US consumers, bypassing classic middlemen, wholesalers, distribution channels, importers, and of course, brick-and-mortar retailers.
# How much are brick-and-mortar retailers spending in order to catch up with Amazon and others that have gotten ahead of them in the ecommerce game? For example, Walmart disclosed that at the end of its last fiscal year, it had 33 dedicated ecommerce fulfillment centers around the country. That’s nearly double from a year earlier when it had 17. These are vast modern warehouses where a lot of the work is automated. They’re packed with expensive equipment and technology. Walmart also disclosed that during the year it had invested $5.2 billion in ecommerce and technology. This includes the new fulfillment centers. That $5.2 billion it spent was up 16% from the prior year. And it compares to only $2.5 billion it spent on store remodels and new stores. In other words, it’s investing twice as much in its ecommerce business as it is investing in its brick-and-mortar business. And its ecommerce business is still small compared to the thousands of mega-stores it has around the country, and ecommerce is also still small in terms of sales. We’ll get to those sales in a moment. Walmart also blows billions of dollars on buying ecommerce startups. The most it ever spent on a single startup was $3.3 billion for Jet.com in 2016, a small outfit at the time that had been selling stuff for only about a year.
# Last week, Reuters published an investigative report, based on interviews with multiple sources among Jet.com suppliers and consultants advising Walmart on its ecommerce business. And it got some Walmart employees to talk. This report showed how Walmart has been quietly dismantling Jet.com as an entity and absorbing its people into Walmart.com, as sales at Jet.com had been falling and never reached the promised goals. Walmart came out with a press release, essentially confirming the Reuters report, while putting its own spin on it. But that $3.3 billion it spent on buying Jet.com is gone and won’t come back. Walmart has been warning that the expenses related to its aggressive expansion into ecommerce are big and getting bigger, and are cutting into is profits. These billions of dollars spent on acquisitions, and the billions of dollars spent every year separately on building out its ecommerce infrastructure and technology show how serious Walmart has become after blowing off for many years the existential threat that ecommerce poses to its own business. Walmart’s ecommerce business is already huge, but it’s not nearly huge enough, compared to its other operations. The company started to disclose the dollar figures in its SEC filings in 2018, so we can actually see the dollars involved.
# In the last fiscal year, ended January 31, 2019, Walmart’s ecommerce sales in the US soared by about 35% to nearly $16 billion! But that was only 4% of its total US sales. During the quarter ended April 30, Walmart’s ecommerce sales in the US jumped by 34% year-over-year to $4.3 billion. And the share of its US ecommerce business rose to 5.3% of its total US sales. At the current rate of growth, its ecommerce sales in the US will exceed $20 billion this year. Walmart went from on online-denier a decade ago to the third largest online retailer in the US in 2019, according to eMarketer estimates, behind only Amazon and eBay. And ahead of number four and five, Apple and Home Depot. Yes, Homed Depot is a huge online seller! Not too long ago, the online-deniers said that people would never buy home-improvement materials, tools, and home appliances online. But they do, just like they’re now buying shoes on line. But Walmart is still woefully behind: in Q1, only 5.3% of its US sales came from ecommerce.
# Among the other brick-and-mortar retailers that now disclose actual online sales are Best Buy, Nordstrom, and Neiman Marcus. And they’re all ahead of Walmart. Most brick-and-mortar retailers still only brag about how fast their online sales are growing in percentage terms but don’t disclose online sales in dollars because it would show how terrible their brick-and-mortar stores are doing. Nordstrom, and Neiman Marcus both get over 30% of their total sales from ecommerce. But sales at their brick and mortar stores are in decline. Nordstrom’s online sales rose 7% year-over-year in its last quarter, to just over $1 billion, while its brick-and-mortar sales fell 7.5% to $2.3 billion. Nordstrom has a great online business, but its brick-and-mortar business is dying. Best Buy’s online sales last quarter rose by 14% to $1.3 billion, and accounted for 15% of its total sales. But its brick and mortar sales declined 1.3%. Macy’s net sales in the quarter fell 0.6% to $5.5 billion, despite what it called “double-digit” growth in ecommerce sales. It still does not disclose actual online sales. But you don’t need to be a genius to figure out, when overall sales decline while digital sales are soaring, just how bad business must be at its ever-shrinking number of brick-and-mortar stores.
# For many years, Walmart had decided that it, as America’s largest retailer with thousands of mega-stores around the country, won’t be threatened by ecommerce. Americans like to go to the store, the thinking went. They’d never buy shoes, food, clothing, and toys online. Walmart’s initial response was to try to kill the “Amazon subsidy”, the quirk in the law that allowed Amazon and other online-only retailers to sell merchandise across the US without collecting sales taxes, while Walmart had to collect sales taxes, including on its online sales, in all states where it had stores, and it has stores everywhere. So Walmart teamed up with states that needed the sales tax revenues. In 2012, California became the first big state that compelled Amazon to collect sales taxes. In rapid-fire sequence, other states followed. By 2017, Amazon collected sales taxes in all 45 states that have state-wide sales taxes and in Washington DC. This had been a true competitive disadvantage for Walmart, compared to online-only retailers. But after this disadvantage was removed, online sales didn’t crater. On the contrary, they continued to boom, and some of those sales came out of Walmart’s hide, and its brick-and-mortar sales stalled.
# So Walmart started throwing money around, many billions of dollars every year, on acquisitions in the ecommerce space and on investment in its own technologies and infrastructure. For a simple reason: to stay relevant, and to remain the largest retailer in the US. It has been hit-and-miss, as the Jet.com acquisition shows. But the threat is larger and wider and involves the entire world. Manufacturers in China, India, and other places are selling directly to US consumers, by having set up shop as third-party vendors on platforms such as Amazon, eBay, Alibaba, and many smaller ones – thereby going around US retailers entirely. For example, in 2017, we bought the best set of cotton sheets we’ve ever bought. We got it online, from the manufacturer in India that was a third-party vendor on Amazon. We paid $79.99 for a four-piece king set, with free shipping. The last time we’d bought sheets before then, we’d bought cotton sheets, also made in India, at Nordstrom Rack, and we’d paid about $250 for the set. Or the other day, I drove to the nearest surviving sporting goods store to buy some defogger for my swimming goggles. The closest store had already shut down a few years ago. So this store is a good distance away. In the past, the store carried two types of defogger: The one I like, made by a small US company; and the one by a big-name US company that everyone knows that dominates swimming gear. I had tried their defogger but didn’t like it. But when I got to the store, after fighting San Francisco weekend tourist-rush-hour traffic, I found out they don’t carry my brand anymore. They only carry the big-name defogger. I’d wasted time and gasoline. Back home, I ordered three bottles online directly from the small manufacturer in the US, off their ecommerce site. It arrived in my mailbox three days later. This is what retailers have to contend with.
# Anyone can now sell their merchandise directly online. The competition is everywhere. It’s not just Amazon or Walmart or Macy’s. Ecommerce and the globalization of retail that ecommerce makes possible have crushed old distribution channels, middlemen, and local retailers by going around them. They have crushed large retailers in the US, such as Sears, Kmart, Toys R US, Payless Shoes, and Bon-Ton stores. They have crushed prices and margins because comparison-shopping online is the easiest thing in the world, and consumers can buy from anyone anywhere. It has opened to door to small manufacturers to sell directly to consumers, via their own sites or as third-party vendors on another platform, if they choose to get smart about this. This is a historic change in how retail is happening, and it’s just the beginning of it. Classic brick-and-mortar retailers will have to get on top of it in an all-out effort, even the biggest of the biggies Walmart, or they will eventually be counted among the retailers, like Sears, that were obviated by events....

woensdag 19 juni 2019

Dovish Fed Sparks Safe-Haven Scramble For Bonds And Bullion As Traders Dump Dollar

Powell: "There was not much support for cutting rates now at this meeting. It would be better to see more before moving." How much moar will the market demand now?


Just how dovish was it? While 8 Fed members now see at least one cut in 2019, the median rate expectation did not change (not that dovish)...


But 2020 median rate expectations did continue to slide...


US equity markets trod water for most of the day until the FOMC statement, and even then did not surge as so many had hoped on Powell's dovishness...


Stocks overall ended higher on the day (thanks to a panic bid around 1540ET)...


The S&P is less than 1% from record highs. Thanks to a huge buying program that suddenly appeared...


Defensive stocks soared on the Fed statement and the initial cyclical spike faded...


S&P Utilities closed at a record high. Financials slumped into the red after The Fed...


Bonds and stocks keep diverging further...


Treasury yields plunged on the Fed statement...


With 10Y testing yesterday's cycle spike lows with a 2.01% handle...


And 2Y Yields crashed over 10bps to its lowest since Nov 2017...


Inflation Breakevens jumped after The Fed statement...


The Dollar tumbled on the Fed Statement...


Cryptos trod water today (with Bitcoin hovering around $9100)...


Commodities all rallied on the Fed statement...


Investors rushed into gold as the dovish Fed statement struck, pushing the precious metal back above $1350 once again...


But it appeared the machines were working hard...


Finally, we note that this is only the 2nd time in Powell's 11 meetings that the S&P closed green on FOMC day...


As Fed rate-cut expectations accelerate lower...


And The National Financial Conditions Index shows that things are already about as loose as can be, lower than before the 2008 financial crisis...


That's before The Fed cuts. As Bloomberg's Cameron Crise noted, John Williams suggested a few weeks ago that the Fed wouldn’t be beholden to bond markets. I guess he was wrong. The ultimate justification for the change in tune looks to be a downgrade to the inflation profile, even though just six weeks ago the inflation shortfall was deemed to be “transitory.” It’s hard to escape the notion that the Fed was dragged into this shift by market pricing; it seems as if bond traders are running policy now....