• Теги
    • избранные теги
    • Люди145
      • Показать ещё
      Страны / Регионы150
      • Показать ещё
      Компании266
      • Показать ещё
      Разное160
      • Показать ещё
      Показатели44
      • Показать ещё
      Формат19
      Международные организации23
      • Показать ещё
      Издания19
      • Показать ещё
      Сферы2
11 февраля, 00:19

Обзор валютного рынка за неделю

По итогам недели большинство основных валют закрылось ниже улевой отметки. Минимальный рост по отношению к доллару США показал британский фунт (+0,06%). Падение продемонстрировали австралийский доллар (-0,08%), канадский доллар (-0,54%), японская иена (-0,67%), швейцарский франк (-1,12%), евро (-1,36%) и новозеландский доллар (-1,56%). Доллар США вырос в понедельник против евро, в то время как инвесторы оценивают перспективы политических и экономических перемен в США и в Европе. По словам аналитиков, евро испытывает давление со стороны политической неопределенности перед выборами во Франции. Марин Ле Пен, лидер правых сил Франции, в прошлые выходные объявила о выдвижении своей кандидатуры на пост президента страны. Инвесторы опасаются, что победа Ле Пен приведет к выходу Франции из еврозоны и поставит под угрозу будущее единой европейской валюты. Между тем президент Европейского центрального банка Марио Драги заявил в понедельник, что еще не пришло время отказываться от мер стимулирования, принятых центральным банком, хотя и указал на признаки улучшения ситуации в экономике. Небольшое давление на евро ранее оказали данные по еврозоне и Германии. Результаты опроса, представленные исследовательской группой Sentix, показали, что настроения инвесторов в еврозоне несколько ухудшились в январе, в то время как индекс текущей ситуации резко вырос. Согласно данным, индикатор уверенности инвесторов снизился в феврале до 17,4 пункта с 18,2 пункта в январе (максимум с августа 2015 года). Последнее значение совпало с ожиданиями экспертов. Между тем, суб-индекс текущих условий подскочил в феврале до 20,5 пункта с 16,5 пункта в прошлом месяце, достигнув максимума с мая 2011 года. Тем временем, индекс ожиданий снизился до 14,3 пункта по сравнению с 20,0 пункта в январе. Также отчет показал, что индекс, отслеживающий настроения инвесторов в Германии - крупнейшей экономике Европы - ухудшился до 31,3 пункта с 33,1 в январе. Инвесторы также стали более негативно оценивать перспективы Германии - индекс, измеряющий ожидания, снизился до 11,0 пункта с 15,3 пункта. Тем временем, индекс текущих условий вырос до 53,5 с 52,2 в январе, достигнув максимума с июня 2011 года. Доллар США вырос во вторник после того, как руководители ФРС просигнализировали о вероятности повышения процентных ставок в ближайшие месяцы. Аналитики связывают укрепление доллара с комментариями представителей ФРС, в которых содержатся сигналы о возможности повышения краткосрочных процентных ставок в ближайшие месяцы. Повышение ставок обычно оказывает поддержку доллару, делая его более привлекательным для инвесторов, стремящихся к высокой доходности. Доллар получил некоторую поддержку после заявления главы ФРБ Миннеаполиса Нила Кашкари о том, что центробанк США должен проводить гибкую монетарную политику. В понедельник президент ФРС-Филадельфия Патрик Харкер заявил, что может поддержать повышение процентных ставок на мартовском заседании центрального банка. На минувшей неделе аналогичное заявление сделал президент ФРС-Сан-Франциско Джон Уильямс. Падение евро ранее также вызвано публикацией слабых данных по Германии. Статистическое ведомство Destatis сообщило, что объем промышленного производства в Германии неожиданно снизился в декабре. Согласно данным, промпроизводство сократилось на 3 процента относительно ноября, когда было зафиксировано повышение на 0,5 процента. Экономисты прогнозировали рост производства на 0,3 процента. Без учета энергии и строительства, промышленного производства упало на 3,4 процента в декабре. Производство электроэнергии снизилось на 0,9 процента, а объемы строительства упали на 1,7 процента. Производство капитальных товаров и потребительских товаров снизилось на 5,4 процента и 3,1 процента, соответственно. Производство промежуточных товаров упало на 1,1 процента. Доллар США упал в среду против евро и японской иены, так как инвесторы предпочитали активы-убежища ввиду роста неопределенности относительно политического и экономического будущего США. Доллар дешевеет с начала года из-за неопределенности планов президента США Дональда Трампа касательно налоговой реформы и налогово-бюджетного стимулирования. "Для возобновления ралли доллара необходима конкретная информация по реформированию системы корпоративного налогообложения", - заявил Алессио де Лонгис, менеджер OppenheimerFunds. Кроме того, инвесторы все меньше ждут повышения процентных ставок в США в ближайшие месяцы ввиду слабого роста заработных плат и снижения цен на нефть, которые сдерживают инфляционные ожидания. Все это оказывает давление на доллар, так как он склонен к росту при повышении ставок. Курс доллара в четверг продолжил повышение против других основных валют после заявлений Дональда Трампа и оптимистического отчета о состоянии рынка труда в США. На встрече с генеральными директорами авиационных компаний Трамп заявил, что в течение следующих двух-трех недель он сделает «феноменальное» заявление по поводу налогов. Он также сообщил об отмене регуляторных актов. Однако осталось неясным, имеет ли он в виду авиационную отрасль или всю экономику США. Эти заявления были сделаны после того, как Министерство труда США сообщило, что число первичных заявок на получение пособий по безработице в США снизилось на 12 тыс. за неделю, которая завершилась 4 февраля. Общее число заявок теперь составляет 234 тыс. На прошлой неделе число заявок составило 246 тыс. Аналитики ожидали повышения за прошлую неделю числа заявок по безработице на 4 тыс. до 250 тыс. Ранее поддержку евро оказали статданные по Германии. Статистическое ведомство Destatis сообщило, что положительное сальдо торгового баланса Германии выросло по итогам 2016 года, достигнув рекордного уровня. Согласно отчету, в 2016 году профицит торгового баланса составило 252,9 млрд. евро, что оказалось самым высоким значением за всю историю наблюдений и значительно превысило предыдущий пик на уровне 244,3 млрд. евро, достигнутый по итогам 2015 года. Объем экспорта расширился на 1,2 процента, а объем импорта вырос на 0,6 процента в 2016 году. Германия экспортировала товаров на сумму в 1,207.5 млрд. евро, а стоимость импортируемых товаров составила 954,6 млрд. евро в 2016 году. Экспорт и импорт достигли новых максимумов. Кроме того, Статистическое ведомство сообщило, что в декабре 2016 года экспорт сократился в первый раз за последние три месяца. Экспорт снизился на 3,3 процента после 3,9-процентного увеличения в ноябре. Аналитики ожидали, что экспорт сократится лишь на 1,3 процента. Объем импорта не изменился после того, как вырос на 3,5 процента в ноябре. Экономисты прогнозировали снижение на 1,1 процента. Положительное сальдо торгового баланса (с учетом сезонных поправок) уменьшилось до 18,4 млрд. евро с 21,8 млрд. евро в ноябре. Давление на доллар в пятницу оказали данные по США. В феврале индекс потребительского доверия в США упал до 95,7 пункта с январского уровня в 98,5 пункта, свидетельствуют предварительные данные Мичиганского университета, который рассчитывает этот показатель. Аналитики в среднем ожидали более умеренного снижения, до 98 пунктов. Подындекс отношения американских потребителей к текущей финансовой ситуации в феврале практически не изменился, составив 111,2 пункта по сравнению со 111,3 пункта в январе. Показатель потребительских ожиданий на ближайшие полгода упал до 85,7 пункта с 90,3 пункта месяцем ранее. Инфляционные ожидания на среднесрочную перспективу (ближайший год) повысились до 2,8% вместо ожидавшихся в январе 2,6%, тогда как прогноз на долгосрочную перспективу (горизонт 5-10 лет), наоборот, снизились с 2,6% до 2,5%. Фунт торговался смешано против доллара США в среду, что было связано с отсутствием новых драйверов. Незначительное влияние на фунт оказали результаты исследований рынка труда Великобритании, опубликованные Конфедерации найма и трудоустройства (REC) и компанией IHS Markit. Согласно данным, индикатор постоянного трудоустройства снизился в январе до 54,5 пункта с 55,2 пункта в декабре, а аналогичный показатель для временного персонала ухудшился до 57.7 пункта с 58.4 пункта. Между тем, индекс общей доступности персонала в январе составил 42,4 пункта по сравнению с 43,0 пункта в декабре. Индекс доступности постоянного персонала снизился до 42,3 пункта с 42,9 пункта. Индекс вакантных рабочих мест вырос в январе до 62,8 пункта с 59,8 пункта, что говорит о том, что работодатели изо всех сил пытаются заполнить имеющиеся пробелы. Тем временем, индекс зарплат для постоянных рабочих увеличился до 58,6 пункта с 55,2 пункта, зафиксировав самые быстрые темпы роста зарплаты за девять месяцев. Если анализировать на региональном уровне, все четыре британских региона, охватываемые исследованием, отметили, что постоянное трудоустройство увеличилось в январе, в то время как Шотландия сообщила о дальнейшем снижении. Кроме того, исследование Банка Англии указало, что показатели экспорта выросли, а потребительские расходы демонстрируют устойчивость. "Намерения компаний в отношении найма сотрудников, а также инвестиционных вложений немного активизировались, что предполагает небольшой прирост расходов в этом году. Показатели экспорта выросли благодаря ослаблению фунта и ускорению темпов роста мировой экономики. Рост потребительских расходов по-прежнему является устойчивым, но в течение года может снизиться из-за роста потребительских цен", - сообщили в ЦБ. Фунт ранее в четверг резко вырос против доллара США, приблизившись к недельному максимуму, поскольку позитивная динамика фондового рынка Европы ослабила нежелание инвесторов рисковать. Еще одной причиной укрепления фунта являются новости о том, что накануне Палата общин британского парламента приняла в третьем и окончательном чтении акт, запускающий процесс выхода страны из Европейского Союза. Законопроект о выходе из ЕС поддержали 494 депутата, против выступили 122. Перед финальным голосованием депутаты обсуждали несколько поправок, но ни одна из них не была принята. Теперь законопроект должен пройти обсуждение в Палате лордов, но с этим не возникнет проблем. Акт о выходе Великобритании из ЕС планируют одобрить обеими палатами до саммита ЕС, запланированного на март 2017 года. После принятия акта премьер-министр Британии Мэй получит право начать процесс выхода страны из ЕС. Кроме того, небольшую поддержку фунту оказал обзор, опубликованный Королевским институтом дипломированных оценщиков (RICS). Согласно данным, баланса цен на жилье вырос до +25 в январе после падения до +23 в декабре. Центр Лондона - где рынок жилья находился под давлением из-за опасений по поводу Брекзита и высоких налогов на покупку - сообщил об одиннадцатом месячном падении цен подряд. Впервые с сентября, респонденты не ожидают, что цены в Лондоне будут повышаться в течение следующих 12 месяцев. Между тем, в RICS заявили, что в течение следующих пяти лет ее члены ожидают, что средние цены на жилье в Британии увеличатся чуть менее чем на 20 процентов, в то время как арендные ставки, согласно прогнозам, вырастут более чем на 25 процентов. Со времен референдума в июне рынок жилья демонстрировал более высокую производительность, чем ожидалось, но в RICS сообщили, что в январе спрос со стороны новых покупателей жилья почти не изменился - только 5 процентов заявили о повышении спроса, что является самым низким показателем с августа 2016 года. Небольшую поддержку фунту ранее в пятницу оказали британские статданные по производству и внешней торговле, которые превысили ожидания аналитиков. Управление национальной статистики (УНС) сообщило, что в период с октября по декабрь 2016 года производство в обрабатывающей промышленности выросло на 1,2 процента по сравнению с предыдущими тремя месяцами, чему способствовал 2,1-процентный прирост в декабре. Аналитики ожидали, что по итогам декабря производство вырастет лишь на 0,5 процента. По сравнению с декабрем 2015 года, производство в обрабатывающей промышленности увеличилось на 4,0 процента, зафиксировав самый сильный рост с апреля 2014 года. Объем промышленного производства в целом вырос на 1,1 процента, что также оказалось выше ожиданий экспертов (+0,2 процента). В годовом выражении, промпроизводство увеличилось на 4,3 процента (самый сильный рост с января 2011 года) после повышения на 2,2 процента ноябре (пересмотрено с 2,0 процента). Отдельный отчет от УНС показал, что общий дефицит при торговле товарами сократился до 3,304 млрд. фунтов по сравнению с 3,559 млрд. фунтов в ноябре (пересмотрено с 4,17 млрд. фунтов). В УНС пояснили, что последнее снижение дефицита в основном было обусловлено увеличением экспорта товаров в страны, не входящие в ЕС, на 1,1 млрд. фунтов стерлингов. Кроме того, отчет показал, что экспорт и импорт были на рекордно высоком уровне. Экспорт составил 48,822 млрд. фунтов, а импорт составил 52,126 млрд. фунтов. Экспорт товаров вырос на 4,4 процента в месячном выражении, до рекордных 28,545 млрд. фунтов. Импорт товаров вырос на 1,4 процента с ноября, до рекордных 39,435 млрд. фунтов. Видимый дефицит торгового баланса составил 10,89 млрд. фунтов, что оказалось меньше прогнозов экспертов (11,45 млрд. фунтов). Дефицит торгового баланса со странами, не являющихся членами ЕС, составил 2,114 млрд. фунтов по сравнению с ожиданиями на уровне 3,5 млрд. фунтов. Доллар США снизился против канадского доллара в пятницу после выхода сильных данных по рынку труда Канады. Количество занятых в Канаде значительно увеличилось в январе, ускорив темпы относительно предыдущего месяца, и превысив ожидания аналитиков. Кроме того, в январе было зафиксировано снижение уровня безработицы. Об этом сообщалось в отчете Статистического управления Канады. Согласно данным, в прошлом месяце численность занятых выросла на 48 300 позиций, что оказалось весьма неожиданных для экспертов - ожидалось сокращение на 5 000 позиций. Учитывая январское изменение, экономика добавила 239 000 рабочих мест в течение последних шести месяцев, продемонстрировав лучшую производительность за полгода с ноября 2002 года. По сравнению с январем 2016 года занятость увеличилась на 276 000 позиций (+1,5%), причем большая часть прироста отмечалась с августа по январь. Кроме того, отчет показал, что уровень безработицы в стране снизился до 6,8% с 6,9% в декабре. Ожидалось, что безработица останется без изменений. Почти все новые рабочие места в январе были созданы в секторе услуг (+42 600), во главе с увеличением в секторе финансов, страхования, недвижимости, аренды и лизинга, бизнеса, строительство и других вспомогательных услуг, транспортировки и складирования, и государственного управления. С другой стороны, занятость снизилась в секторе информации, культуры и отдыха. Полная занятость выросла 15 800 позиций после повышения на 70 900 позиций в предыдущем месяце, в то время как число новых рабочих мест на неполный день поднялось на 32 400 позиций. В годовом выражении, полная занятость выросла на 86 000 позиций (+0,6%), а неполная занятость увеличилась на 190 000 позиций (+5,6%). Информационно-аналитический отдел TeleTradeИсточник: FxTeam

08 февраля, 11:25

Промсвязьбанк: Главным фактором для рынка ОФЗ сегодня будет движение нефтяных цен

Глобальные рынки Спрэд между французскими и немецкими "десятилетками" продолжает держаться вблизи максимальных уровней за последние четыре года. На американском долговом рынке ситуация по итогам вчерашнего дня сильно не изменилась – доходности 10-летних treasuries провели прошлую торговую сессию в диапазоне 2,37-2,44%. Из ключевых событий дня выделим выступление главы ФРБ Миннеаполиса и голосующего в этом году члена FOMC Нила Кашкари, несколько смягчившего общую риторику ФРС после выступления Патрика Харкера днем ранее. Н.Кашкари отмечает, что ФРС еще не достиг целевого показателя по инфляции, следовательно, "стимулирующая монетарная политика и далее будет уместной". Таким образом, расстановка сил внутри FOMC не меняется – общий тон риторики представителей регулятора является скорее нейтральным, соответственно, рынок на данный момент ожидает следующего повышения ставки не ранее второго квартала. На европейском долговом рынке резких движений в ходе вчерашнего дня не было. Спрэд между 10-летними гособлигациями Франции и Германии остается на уровне 74-76 б.п. (максимальных уровней с 2012 г.). Рост доходностей по гособлигациям Франции обусловлен в первую очередь опасениями в преддверии президентских выборов в стране. Эти же причины в некоторой степени оказывают давление на евро в последние несколько торговых сессий. На глобальном валютном рынке отметим возврат индекса доллара выше отметки в 100 б.п. Сохранение текущих тенденций на рынке может способствовать снижению пары евро/доллар в район отметки 1,06 долл., драйверов для более серьезного снижения пары на текущий момент мы скорее не видим. Долговые рынки могут продолжить консолидацию вблизи текущих значений. Еврооблигации Во вторник российские суверенные евробонды продолжили консолидироваться в ожидании новых сигналов от динамики UST и сырьевых площадок. Во вторник российские суверенные евробонды продолжили консолидироваться в ожидании новых сигналов от динамики базовых активов и сырьевых площадок. Так, UST-10 большую часть дня находилась в диапазоне 2,4%-2,42% по доходности, хотя уже вечером перешла к снижению до 2,38% годовых. Отметим, из статистики в США вчера вышел отчет министерства торговли о внешнеторговом балансе, отрицательное сальдо которого в декабре сократилось на 3,2% до 44,3 млрд долл., при этом за весь 2016 г. оказалось максимальным за последние 4 года, составив 502,3 млрд долл. Вместе с тем, цены на нефть сорта Brent продолжили снижение, но удерживались выше отметки 55 долл. за барр., что пока не сильно затрагивает российский сегмент. В итоге, доходность RUS’23 удерживается на уровне 3,73%, длинные RUS’42 и RUS’43 – 4,96% годовых. Сегодня с утра доходность UST-10 находится вблизи отметок в 2,38%-2,39% годовых, а нефть Brent пытается стабилизироваться выше значения 54,5 долл. за барр. В этом ключе вряд ли стоит ждать заметных изменений котировок суверенных евробондов России, которое может ограничиться восстановлением кредитных премий с базовыми активами. Впрочем, если Минэнерго США подтвердить (в 18-30 мск) сильный роста запасов нефти за неделю, о чем сообщил вчера API (рост на 14,2 млн барр.), то давление на "черное золото" может возрасти. Дальнейшее снижение котировок нефти может начать оказывать более ощутимое влияние на российские евробонды. Интерфакс сообщил, что Газпром 13 марта начнет road show евробондов в долларах, а 27 марта начнутся встречи с инвесторами в рамках размещения "европейского" выпуска в фунтах стерлингов или евро. Напомним, в 2016 г. Газпром трижды выходила на рынок, разместив два выпуска еврооблигаций в швейцарских франках объемом 500 млн каждый и один выпуск евробондов на 1 млрд евро. Напомним, Газпрому в марте предстоит погасить два выпуска евробондов общим объемом 1,9 млрд евро, в ноябре еще 500 млн евро. Пока не ждем заметных изменений котировок суверенных евробондов России, но продолжение падения нефти может начать оказывать более ощутимое давление на российский сегмент. FX/Денежные рынки Операции ЦБ на валютном рынке не оказывали заметного влияния на курс, ослабление рубля было следом за нефтью. Вчера ЦБ РФ начал выкупать иностранную валюту на открытом рынке в объемах, определяемых Минфином (в ближайший месяц ежедневно около 105- 107 млн долл.). Значительных движений на внутреннем валютном рынке операции ЦБ не вызвали, ранее регулятор давал понять, что объемы покупок будут распределяться равномерно в течение дня, чтобы минимизировать влияние действий ЦБ на валютный курс. При этом внешние условия оказывали умеренное давление на рубль. Цены на нефть вчера снизились еще на 1,6%, локально опускаясь ниже отметки в 55 долл/барр. по Brent. Отметим, вчера Американский институт нефти сообщил о росте запасов нефти за неделею в Штатах на 14,2 млн барр. Сегодня состоится публикация официальных данных по запасам и добыче нефти от EIA (в 18-30 мск). Несмотря на значительное снижение нефти в последние два торговых дня, позиции рубля выглядят достаточно крепко. Дальнейшее снижение нефти в район 54-54,50 долл/барр. по Brent может способствовать ослаблению рубля до уровней 59,60-60 руб/долл. Сегодня состоятся аукционы Минфина, на которых будет размещено два выпуска ОФЗ-ПД совокупным объемом в 40 млрд руб., что может оказывать некоторую поддержку рублю. На рынке МБК краткосрочные ставки во вторник снизились до 10,03%. Остатки на счетах и депозитах в ЦБ увеличился до 2,7 трлн руб. Вчера ЦБ РФ провел депозитный аукцион сроком 7 дн., абсорбировав 710 млрд руб. (на прошлом аукционе лимит был 320 млрд руб.), и депозитную операцию "тонкой настройки" на 1 день, объем предложения банков составил 274,9 млрд руб. при лимите в 380 млрд руб. Значительный объем абсорбирования ликвидности может способствовать некоторому увеличению спроса на рубль и локальному росту ставок на рынке МБК. Ожидаем консолидацию пары доллар/рубль вблизи диапазона в 59,20-59,60 руб/долл. Облигации Во вторник котировки ОФЗ снижались вслед за нефтяными ценами. Во вторник на глобальных долговых рынках не наблюдалось выраженного тренда, и котировки ОФЗ планомерно снижались вслед за нефтяными ценами: фьючерсы на Brent упали на 2% до 55 долл. за барр. без значительных новостных поводов. В итоге, доходности наиболее торгуемых вчера выпусков с дюрацией от 2 лет подросли на 4-7 б.п. до 8,1-8,4%. Пока что отскока на рынке нефти не наблюдается на фоне сообщения от Американского института нефти о росте ее запасов в США на прошлой неделе на 14,2 млн барр. Официальные данные от Минэнерго будут опубликованы сегодня в 18:30 МСК, рост запасов ожидается более умеренным – в пределах 2,5 млн барр. Полагаем, что из-за ухудшения конъюнктуры на сырьевых площадках роста котировок ОФЗ не стоит ждать и сегодня, как и значительного спроса на первичном рынке в ходе аукционов. Минфин предложит инвесторам впервые размещенный на прошлой неделе 6-летний выпуск серии 26220 в объеме 25 млрд руб. по номиналу и 15-летние ОФЗ 26218 в объеме 15 млрд руб. по номиналу. Величину спроса на среднесрочный выпуск прогнозируем на уровне 45-55 млрд руб. при средневзвешенной цене 97,3-97,4 (YTM 8,13-8,15%), на 15-летние 26218 – 20-25 млрд руб. при средневзвешенной цене 102,2- 102,3 (YTM 8,39-8,41%). На сегодняшнее размещение 5-летних бондов ЧТПЗ (Ва3/–/ВВ-) серии БО-001Р-02 в объеме 5 млрд руб. (с 11:00 МСК до 16:00 МСК) мы смотрим более оптимистично. По- прежнему ожидаем, что оно пройдет по нижней границе ориентира по ставке 1-го купона, установленного на уровне 9,95-10,20% годовых (YTM 10,20-10,46%), поскольку желание инвесторов получить более высокую доходность возрастает при уменьшении перспектив роста на рынке классических гособлигаций. Главным фактором для рынка ОФЗ сегодня будет движение нефтяных цен. Пока предпосылок для снижения доходностей и высокого спроса на аукционах Минфина не наблюдается. Аукционы ОФЗ Сегодня на аукционах Минфина будет размещено 2 выпуска ОФЗ-ПД общим объемом 40 млрд руб.: 6-летний 26220 (25 млрд руб.) и 15-летний 26218 (15 млрд руб.). Отметим, что новый среднесрочный выпуск пользовался повышенным интересом на прошлой неделе – спрос составил 62,4 млрд руб. при предложении 15 млрд руб. по номиналу. При этом средневзвешенная цена сложилась на рыночном уровне 97,3% (YTM 8,15%). Ожидаем, что неудовлетворенный спрос в объеме 47,4 млрд руб. окажет весомую поддержку предстоящему размещению. За прошедшую неделю доходности ОФЗ изменились несущественно в условиях относительной стабильности на глобальных рынках. Нефть Brent подешевела на 1,5% до 55 долл. за барр., а доходности UST-10 снизились на 5 б.п. до 2,4%. Мы считаем, что при отсутствии внешних сигналов рынок рублевых гособлигаций продолжит двигаться в рамках бокового тренда до конца 1 квартала. Несмотря на благоприятную динамику инфляции, опустившуюся до 5,0% в годовом выражении по итогам января, потенциал для снижения доходностей ограничивается умеренно-жесткой политикой Банка России. По итогам февральского заседания регулятор сохранил ключевую ставку на уровне 10% годовых и обозначил, что "с учетом изменения внешних и внутренних условий потенциал снижения ключевой ставки в 1 пол. 2017 г. уменьшился". Тем не менее, выпуски с фиксированным купоном по-прежнему сохраняют фундаментальную привлекательность на долгосрочном горизонте, в том числе благодаря удешевлению фондирования для локальных игроков. По данным ЦБ, максимальная процентная ставка по рублевым вкладам физлиц в топ-10 банков за последние 3 месяца опустилась на 60 б.п. до 8,175%, что уже сопоставимо с текущими доходностями ОФЗ. По нашему мнению, участие в сегодняшних аукционах может быть интересно долгосрочным инвесторам, либо спекулятивным игрокам в расчете на получение премии в доходности ко вторичному рынку. Для ОФЗ 26220 это уровень 97,1% от номинала (YTM 8,2%), для ОФЗ 26218 – 102% от номинала (YTM 8,43%). Объем спроса на среднесрочный выпуск прогнозируем на уровне 45-55 млрд руб. при средневзвешенной цене 97,3-97,4 (YTM 8,13-8,15%), на 15-летние 26218 – 20- 25 млрд руб. при средневзвешенной цене 102,2-102,3 (YTM 8,39-8,41%). Корпоративные события Прибыль Сбербанка (Ba1/–/BBB-) в январе составила 57,9 млрд руб. (ПОЗИТИВНО). В январе Сбербанк заработал чистую прибыль 57,9 млрд руб., свидетельствуют данные опубликованной РСБУ-отчетности. По сравнению с аналогичным периодом прошлого года прибыль выросла в два раза. Улучшение результатов обеспечил рост чистых процентных доходов на 10,7 млрд руб. г/г и сокращение расходов на резервирование потерь на 41,2 млрд руб. г/г. В свою очередь роста чистых процентных доходов Сбербанк добился за счет снижения ставок по депозитам для корпоративных и розничных клиентов. Расходы Сбербанка на совокупные резервы в январе 2017 г. сократились до 20,2 млрд руб. по сравнению с 61,4 млрд руб. в январе 2016 г. Сокращению расходов на резервирование потерь способствовало снижение кредитного портфеля на 8,8% г/г и позитивная динамика по сокращению проблемной задолженности в последние месяцы. Показатели обеспеченности собственными средствами Сбербанка улучшаются за счет капитализации прибыли при консервативной стратегии принятия риска на баланс. Нормативы Н1.1 и Н1.2 на 01.02.2017 г. составили 10,1%, Н1.0=14,0% по сравнению с 7,3% и 11,2% годом ранее. Улучшение кредитных метрик позитивно для обращающихся рублевых облигаций Сбербанка. При этом потенциал роста евробондов ограничен ожиданиями повышения ставок ФРС.

08 февраля, 07:31

Валютные пары торгуются в узком диапазон

В отсутствие важных экономических данных, в ходе азиатской сессии, валютные пары торгуются в узком диапазоне, корректируясь в отношении предыдущей сессии. Евро остается под давлением со стороны политической неопределенности перед выборами во Франции, где лидер правых сил Марин Ле Пен объявила о выдвижении своей кандидатуры на пост президента страны. Инвесторы опасаются, что победа Ле Пен приведет к выходу Франции из еврозоны и поставит под угрозу будущее единой европейской валюты. Также инвесторы по-прежнему ожидают большей ясности в отношении налогово-бюджетного стимулирования президента США Дональда Трампа и предложений по налоговой реформе. Неясность по поводу новой политики президента США немного сдерживает курс американской валюты. Хотя в последнее время доллар вырос, после того, как руководители ФРС просигнализировали о вероятности повышения процентных ставок в ближайшие месяцы. В понедельник президент ФРС-Филадельфия Патрик Харкер заявил, что может поддержать повышение процентных ставок на мартовском заседании центрального банка. На минувшей неделе аналогичное заявление сделал президент ФРС-Сан-Франциско Джон Уильямс. Во вторник президент ФРС- Миннеаполис Нил Кашкари выразился в более осторожном ключе, и отметил, что нынешней ситуации стимулирующая денежно-кредитная политика могла бы быть более подходящей. Позднее на текущей неделе ожидаются комментарии других представителей ФРС, в том числе, президента ФРС-Сент-Луис Джеймса Булларда. Иена торгуется в узком диапазоне по отношению к доллару, в ожидании, предстоящей на этой неделе, встречи между президентом США Дональдом Трампом и премьер-министром Японии Синдзо Абэ. Встреча создает некоторый риск для роста иены, которая может быть чувствительна к какой-либо дальнейшей критике мягкой денежно-кредитной политики Банка Японии. Напомним, на прошлой неделе президент США заявил, что Япония девальвирует свою валюту через мягкую денежно-кредитную политику. Абэ, вероятно, будет стремиться убедить Трампа, что японское правительство не умышленно девальвирует свою валюту и мягкая денежно-кредитной политика направлена на подрыв дефляции. Многие представители Банка Японии, а также его глава Харухико Курода не раз заявляли, существует сильная неопределенность по поводу политики Дональда Трампа. "Перспективы экономики США остаются весьма неопределенными, а новая политика Трампа обусловит неопределенность и экономических перспектив Японии", - говорится в опросе Банка Японии Информационно-аналитический отдел TeleTradeИсточник: FxTeam

08 февраля, 02:59

Вторник: Итоги дня на валютном рынке

Доллар США вырос после того, как руководители ФРС просигнализировали о вероятности повышения процентных ставок в ближайшие месяцы. Аналитики связывают укрепление доллара с комментариями представителей ФРС, в которых содержатся сигналы о возможности повышения краткосрочных процентных ставок в ближайшие месяцы. Повышение ставок обычно оказывает поддержку доллару, делая его более привлекательным для инвесторов, стремящихся к высокой доходности. Доллар получил некоторую поддержку после заявления главы ФРБ Миннеаполиса Нила Кашкари о том, что центробанк США должен проводить гибкую монетарную политику. В понедельник президент ФРС-Филадельфия Патрик Харкер заявил, что может поддержать повышение процентных ставок на мартовском заседании центрального банка. На минувшей неделе аналогичное заявление сделал президент ФРС-Сан-Франциско Джон Уильямс. "Комментарии поддержали доллар, сильно упавший из-за политической неопределенности, довольно нейтрального заявления ФРС на предыдущей неделе и противоречивой статистики по числу рабочих мест вне сельского хозяйства", - отметили аналитики Scotiabank. Доллар должно поддержать то, что "внимание вновь переключилось на денежно-кредитную политику центрального банка", написали аналитики Scotiabank. Доллар снизился с начала года из-за неопределенности по поводу экономической политики президента Дональда Трампа и политики ФРС. Позднее на текущей неделе ожидаются комментарии других представителей ФРС, в том числе, президента ФРС-Сент-Луис Джеймса Булларда. Падение евро ранее также вызвано публикацией слабых данных по Германии. Статистическое ведомство Destatis сообщило, что объем промышленного производства в Германии неожиданно снизился в декабре. Согласно данным, промпроизводство сократилось на 3 процента относительно ноября, когда было зафиксировано повышение на 0,5 процента. Экономисты прогнозировали рост производства на 0,3 процента. Без учета энергии и строительства, промышленного производства упало на 3,4 процента в декабре. Производство электроэнергии снизилось на 0,9 процента, а объемы строительства упали на 1,7 процента. Производство капитальных товаров и потребительских товаров снизилось на 5,4 процента и 3,1 процента, соответственно. Производство промежуточных товаров упало на 1,1 процента. Вместе с тем, дополнительное давление на евро продолжают оказывать вчерашние заявления главы ЕЦБ Драги, которые оказались более пессимистичными, чем ожидались участники рынка. "Поддержка мерами денежно-кредитной политики все еще необходима для устойчивого движения темпов инфляции к целевым показателям", - сказал глава ЕЦБ. Структурная инфляция остается подавленной и, как ожидается, будет восстанавливаться постепенно, добавил он. ЕЦБ все еще отмечает значительное ослабление рынка труда и слабые темпы роста производительности, которые оказывают понижательное давление на повышение зарплаты в регионе. По словам Драги, денежно-кредитная политика в еврозоне может оказывать давление на прибыльность банков по различным каналам. Однако "преимущества QE перевешивают побочные эффекты", считает он. Информационно-аналитический отдел TeleTradeИсточник: FxTeam

07 февраля, 22:23

Американский фокус: доллар США вырос после комментариев представителей ФРС

Доллар США вырос после того, как руководители ФРС просигнализировали о вероятности повышения процентных ставок в ближайшие месяцы. Аналитики связывают укрепление доллара с комментариями представителей ФРС, в которых содержатся сигналы о возможности повышения краткосрочных процентных ставок в ближайшие месяцы. Повышение ставок обычно оказывает поддержку доллару, делая его более привлекательным для инвесторов, стремящихся к высокой доходности. Доллар получил некоторую поддержку после заявления главы ФРБ Миннеаполиса Нила Кашкари о том, что центробанк США должен проводить гибкую монетарную политику. В понедельник президент ФРС-Филадельфия Патрик Харкер заявил, что может поддержать повышение процентных ставок на мартовском заседании центрального банка. На минувшей неделе аналогичное заявление сделал президент ФРС-Сан-Франциско Джон Уильямс. "Комментарии поддержали доллар, сильно упавший из-за политической неопределенности, довольно нейтрального заявления ФРС на предыдущей неделе и противоречивой статистики по числу рабочих мест вне сельского хозяйства", - отметили аналитики Scotiabank. Доллар должно поддержать то, что "внимание вновь переключилось на денежно-кредитную политику центрального банка", написали аналитики Scotiabank. Доллар снизился с начала года из-за неопределенности по поводу экономической политики президента Дональда Трампа и политики ФРС. Позднее на текущей неделе ожидаются комментарии других представителей ФРС, в том числе, президента ФРС-Сент-Луис Джеймса Булларда. Падение евро ранее также вызвано публикацией слабых данных по Германии. Статистическое ведомство Destatis сообщило, что объем промышленного производства в Германии неожиданно снизился в декабре. Согласно данным, промпроизводство сократилось на 3 процента относительно ноября, когда было зафиксировано повышение на 0,5 процента. Экономисты прогнозировали рост производства на 0,3 процента. Без учета энергии и строительства, промышленного производства упало на 3,4 процента в декабре. Производство электроэнергии снизилось на 0,9 процента, а объемы строительства упали на 1,7 процента. Производство капитальных товаров и потребительских товаров снизилось на 5,4 процента и 3,1 процента, соответственно. Производство промежуточных товаров упало на 1,1 процента. Вместе с тем, дополнительное давление на евро продолжают оказывать вчерашние заявления главы ЕЦБ Драги, которые оказались более пессимистичными, чем ожидались участники рынка. "Поддержка мерами денежно-кредитной политики все еще необходима для устойчивого движения темпов инфляции к целевым показателям", - сказал глава ЕЦБ. Структурная инфляция остается подавленной и, как ожидается, будет восстанавливаться постепенно, добавил он. ЕЦБ все еще отмечает значительное ослабление рынка труда и слабые темпы роста производительности, которые оказывают понижательное давление на повышение зарплаты в регионе. По словам Драги, денежно-кредитная политика в еврозоне может оказывать давление на прибыльность банков по различным каналам. Однако "преимущества QE перевешивают побочные эффекты", считает он. Информационно-аналитический отдел TeleTradeИсточник: FxTeam

07 февраля, 19:35

Fed's Kashkari Says "Stock Prices Appear Somewhat Elevated", Explains "What Might Be Wrong"

This morning, Minneapolis Fed Chairman Neel Kashkari penned an essay "Why I Voted to Keep Rates Steady" in which the former Goldmanite says that while core inflation “seems to be moving up somewhat, it is doing so slowly, if at all.”  He adds that “financial markets are guessing about what fiscal and regulatory actions the new Congress and the Trump administration will enact. We don’t know what those will be, so I don’t think we should put too much weight on these recent market moves yet." Repeating a on often heard lament about the lack of rising wages, Kashkari points out that “the cost of labor isn’t showing signs of building inflationary pressures that are ready to take off and push inflation above the Fed’s target” and adds that “it seems unlikely that the United States will experience a surge of inflation while the rest of the developed world suffers from low inflation." Further complicating the analysis of labor market slack, Kashkari writes that “the U-6 measure suggests that there may still be additional workers who might re-enter the labor force if the job market remains healthy” even though “the job market has improved substantially, and we are approaching maximum employment. But we aren’t sure if we have yet reached it. We may not have.” Admitting that a core analysis presented by Zero Hedge many years ago, namely the participation rate of the prime working-age group, those aged 25-54, remains subdued, Kashkari writes that "I prefer to look at these measures by focusing on prime working-age adults. The next chart shows that in both measures, there appears to be more labor market slack than before the crisis." So why is the Fed hiking again? We'll leave that open to answers. Stepping away from jobs, Kashkari gives a uniform justification for the Fed's accomodative policy, stating that “this level of accommodation seems appropriate today given where we are relative to our dual mandate" and makes notable admission that “although stock prices, housing prices and especially some commercial real estate prices appear somewhat elevated, they do not appear to pose an immediate financial stability risk.” Naturally: after all the S&P is only over 200 points from the last time Yellen made the same warning about "stretched valuations." He does concede, however, that "over the long term, I continue to be very concerned about the systemic risks posed by the largest banks. Monetary policy most certainly cannot address the too-big-to-fail risk." Moving to the level of the US Dollar, Kashkari says that “the strong dollar will likely continue to put some downward pressure on inflation. Overall, the global environment doesn’t seem to be sending a strong signal for a change in U.S. interest rates" and adds that “some argue that gradual rate increases are better than waiting and having to move aggressively. It isn’t clear to me that one path is obviously better than the other." In an interesting tangent, Kashakri touches on the topic of Trump's fiscal stimulus and says that "financial markets (both the stock and bond markets) seem to be pricing in some form of fiscal stimulus, perhaps tax cuts and/or increased spending, and perhaps a reduction in regulations from the new Administration and the new Congress. Those developments could be important to overall economic growth and, by extension, to the future path of monetary policy. But we have little information about what those new policies will actually be, what their magnitude will be and when they would take effect. Markets are guessing. Financial markets are good at some things, but, in my view, notoriously bad at forecasting political outcomes. They didn’t forecast Brexit. They didn’t forecast the results of the U.S. presidential election. I don’t have much confidence in their ability to forecast fiscal policy given how little we know today. So I am not yet incorporating the markets’ guesses about fiscal policy changes into my outlook for the economy." Well, it's safe to say that markets have little confident in the Fed's ability to forecast much if anything so at least it's mutual. Finally, in one of the few honest admissions by a Fed president, Kashkari gives his take on "what might be wrong." This is what he says: What might my analysis be missing? Some economic or financial shock could hit us, from within the U.S. economy or from outside. That is always true, and we need to be ready to respond if necessary. In addition, if we are surprised by higher inflation than we currently expect, we might need to raise rates more aggressively. Some argue that gradual rate increases are better than waiting and having to move aggressively. It isn’t clear to me that one path is obviously better than the other.   Some others argue that there may be nonlinearity in the inflationary process and that as inflation crosses the 2 percent threshold, it might suddenly accelerate. I see no evidence of this, especially considering that inflation expectations are well-anchored. Historically, U.S. inflation expectations have moved slowly, generally making large changes only in response to persistent changes in inflation trends. As long as the FOMC remains committed to acting decisively to defend against sustained deviations from our 2 percent target, I see the risk of a sudden change in inflation expectations as low. Perhaps the better question for Neel and his peers is what happens if inflation, instead of spiking, tumbles now that China is actively tightening and no longer exporting inflation. We wonder if the Fed will be as committed to "act decisively" and cut rates and/or launch even more QE when the time comes to admit that the post-Trump sugar high is ending.

01 февраля, 22:03

"The Committee decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent"

No change: Press Release, Release Date: February 1, 2017, For release at 2:00 p.m. EST: Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has...

01 февраля, 22:01

FOMC Statement: No Change to Policy

FOMC Statement: Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate stayed near its recent low. Household spending has continued to rise moderately while business fixed investment has remained soft. Measures of consumer and business sentiment have improved of late. Inflation increased in recent quarters but is still below the Committee's 2 percent longer-run objective. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will rise to 2 percent over the medium term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Daniel K. Tarullo.emphasis added

Выбор редакции
19 января, 17:55

Ending Too Big to Fail

Yves here. Remember the explosion of press coverage last year when incoming Minneapolis Fed member and former Goldmanite and Treasury official Neel Kashkari announced his intent to develop a plan to end the “too big to fail” problem. He not only was going to devote Minneapolis Fed researchers to his program, but solicited broad based […]

18 января, 14:27

Сегодня в США ожидается публикация данных по потребительской инфляции

В среду, 18 января, в Соединенных Штатах Америки ожидается публикация статистики по потребительской инфляции. В 16:30 МСК будет опубликован индекс потребительских цен без учета продуктов питания и энергоносителей (с учетом сезонности), который, как ожидается, в декабре вырос на 0,2% м/м. Между тем, индекс потребительских цен с учетом сезонности за аналогичный период, продемонстрировал рост на 0,3% м/м. В 22:00 МСК будет обнародована Бежевая книга. Из второстепенной статистики следует отметить ипотечные индексы, а также индекс потребительских цен ФРБ Кливленда за декабрь и индексы сопоставимых продаж крупнейших розничных сетей (Красная книга). Сегодня до открытия рынка будут опубликованы финансовые результаты Citigroup, Fastenal, Goldman Sachs Group, U.S. Bancorp и TD Ameritrade, а после закрытия - Netflix. Кроме того, сегодня состоятся выступления главы ФРС Джанет Йеллен и президента ФРБ Миннеаполиса Нила Кашкари.

18 января, 10:29

События сегодняшнего дня:

В 14:00 GMT Член FOMC Роберт Каплан выступит с речью В 15:00 GMT Решение Банка Канады по основной процентной ставке В 16:00 GMT Член FOMC Нил Кашкари выступит с речью В 20:00 GMT Председатель совета управляющих ФРС Джанет Йеллен выступит с речью Ежегодный мировой экономический форум в Давосе. День 2 Информационно-аналитический отдел TeleTradeИсточник: FxTeam

18 января, 08:13

Сегодня в США ожидается публикация данных по потребительской инфляции

В среду, 18 января, в Соединенных Штатах Америки ожидается публикация статистики по потребительской инфляции. В 16:30 МСК будет опубликован индекс потребительских цен без учета продуктов питания и энергоносителей (с учетом сезонности), который, как ожидается, в декабре вырос на 0,2% м/м. Между тем, индекс потребительских цен с учетом сезонности за аналогичный период, продемонстрировал рост на 0,3% м/м. В 22:00 МСК будет обнародована Бежевая книга. Из второстепенной статистики следует отметить ипотечные индексы, а также индекс потребительских цен ФРБ Кливленда за декабрь и индексы сопоставимых продаж крупнейших розничных сетей (Красная книга). Сегодня до открытия рынка будут опубликованы финансовые результаты Citigroup, Fastenal, Goldman Sachs Group и TD Ameritrade, а после закрытия - Netflix. Кроме того, сегодня состоятся выступления главы ФРС Джанет Йеллен и президента ФРБ Миннеаполиса Нила Кашкари.

16 января, 16:43

Key Events In The Coming Week: Trump Inauguration, Davos, Theresa May, ECB, China GDP

The week ahead promises to be a full one, with a plethora of events coming up. The Word Economic Forum in Davos could generate some headlines, with particular focus on Chinese President Xi Jinping, who will be the first Chinese president to attend. Tuesday brings Theresa May's long-awaited Brexit speech, while of course Friday marks the inauguration of Donald Trump as the 45th US president. We will also be keeping a weather eye out for the Supreme Court ruling on Article 50, although there is no set date for its announcement. Central Banks: ECB and BOC No policy change is expected from either the ECB or the BoC, but both press conferences will draw attention, particularly that of President Draghi. The market is convinced that Draghi will do his best to be boring. China Economic Update There is a barrage of Chinese data out on Friday, where the most closely followed number will be China's Real GDP for 4Q will be released in China, as well as IP, retail sales, FAI and December property prices. On Monday, Xi Jinping said China's 2016 GDP is expected to be 6.7%. US: CPI, Industrial Production, Housing, Trump Inauguration There is a busy US calendar ahead, with CPI, Empire Manufacturing, industrial production, housing data and Philly Fed reports. There are several scheduled speaking engagements from Fed officials this week, including two by Chair Yellen on Wednesday and Thursday. The Beige Book for the January FOMC period will be released on Wednesday. The week culminates in the inauguration of Donald Trump as the 45th US president. Cabinet confirmation hearings will also be continuing during the week. Eurozone and UK In the Eurozone, the ECB will be the main event, with the German ZEW and final inflation prints the only data releases of note. In the UK, there is an important week ahead with Theresa May’s speech on Brexit the main focus, but also releases of inflation data, retail sales and the labor market report. Keep an eye out out for the UK Supreme Court ruling on Article 50, although there is no set date for the release. Others In Japan, we get machine orders, PPI, tertiary industry index, the final print of November IP and a speech from the BoJ’s Nakaso. In Australia, labor force data is the key release in the week ahead, while housing finance approvals and consumer confidence in both Australia and New Zealand will also be of interest. In Canada, focus will be on the BoC monetary policy meeting, but we also get CPI and retail sales data. It  should be a very quiet week ahead in Switzerland and the Scandies, although we do hear from Norges Bank Governor Olsen, and of course Switzerland hosts the WEF in Davos. There will be monetary policy meetings in Chile, Malaysia and Indonesia. Earnings Earnings will also be in the spotlight with Morgan Stanley tomorrow, Goldman Sachs, Citigroup and Netflix on Wednesday, IBM on Thursday and Schlumberger and General Electric on Friday due. Davos And Trump Away from that world leaders will also congregate in Davos this week for the World Economic Forum while UK PM Theresa May is due to outline Brexit plans on Tuesday. Clearly the other big focus this week is the inauguration of Donald Trump as US President on Friday. * * * A look at key events by day courtesy of DB: With markets closed in the US today for Martin Luther King Day it’s an unsurprisingly quiet start to the week with just the Euro area trade balance reading in November due. Tuesday kicks off in Japan where industrial production data is due. In Europe there will be plenty of focus on the ECB’s bank lending survey due early on, while the December inflation report in the UK will also be under the spotlight. The January ZEW survey for Germany is also due out. Over in the US tomorrow the only data due out is the January Empire manufacturing print. Turning to Wednesday, Germany and the Euro area will release the final revisions  to December CPI reports while the UK will release the latest labour market data. Over in the US inflation data will also be the focus with the December report due out. Industrial and manufacturing production, as well as the NAHB housing market index will also be due. With little else of note on Thursday morning the main focus will be on the ECB policy meeting. In the US we’ll get housing starts and building permits data as well initial jobless claims and the Philly Fed business outlook print. It’s a blockbuster end to the week in China on Friday with the Q4 GDP print due along with December activity indicators including industrial production, retail sales and fixed asset investment. During the European session we’ll get PPI in Germany and retail sales in the UK. There’s nothing of note in the US on Friday except for Trump's inauguration of course. There’s also plenty of Fedspeak this week. Both Dudley and Williams are scheduled to speak tomorrow, before Kashkari and Yellen speak on Wednesday. The latter is taking part in a discussion at the Commonwealth Club in San Francisco however is also expected to give an economic assessment. The Fed Chair then speaks again on Friday, along with Harker and Williams. The ECB’s Villeroy and Praet also speak today along with the BoE’s Carney while we’ll also get the usual ECB press conference on Thursday. * * * Finally, here is a full breakdown of just US events, together with consensus estimates, courtesy of Goldman Sachs The key economic release this week is CPI on Wednesday. There are several scheduled speaking engagements from Fed officials this week, including two by Chair Yellen on Wednesday and Thursday. The Beige Book for the January FOMC period will be released on Wednesday. Monday, January 16 US markets are closed in observance of Martin Luther King, Jr. Day. There will be no economic data releases. Tuesday, January 17 08:45 AM New York Fed President Dudley (FOMC voter) speaks: Federal Reserve Bank of New York President William Dudley will give a speech on “Evolving Consumer Behavior: A View from the Federal Reserve Bank of New York” at an event sponsored by the National Retail Federation. 08:30 AM Empire manufacturing survey, January (consensus +8.5, last +9.0) 10:00 AM Fed Governor Brainard (FOMC voter) speaks: Federal Reserve Governor Lael Brainard will give a speech on “The Impact of Fiscal Policy on Monetary Policy” at the Brookings Institution in Washington D.C. Audience Q&A is expected. 06:00 PM San Francisco Fed President Williams (FOMC non-voter) speaks: Federal Reserve Bank of San Francisco President John Williams will give the keynote speech at the Sacramento Business Review Economic Forecast at Sacramento State University in California. Audience and media Q&A is expected. Wednesday, January 18 08:30 AM CPI (mom), December (GS +0.29%, consensus +0.30%, last +0.20%); Core CPI (mom), December (GS +0.20%, consensus +0.20%, last +0.15%); CPI (yoy), December (GS +2.1%, consensus +2.1%, last +1.7%); Core CPI (yoy), December (GS +2.2%, consensus +2.2%, last +2.1%): We expect that core CPI rose by 0.20% in December or 2.2% on a year-over-year basis. In the November report, core inflation was softer than expected, mainly due to lower inflation in the categories of apparel, medical care, airfares, and lodging away from home. We expect some payback in the apparel category, in part related to colder-than-average December temperatures. Headline consumer prices likely increased by 0.29% in December. On a year-over-year basis, the headline index likely increased by 2.1%. 09:00 AM Dallas Fed President Kaplan (FOMC voter) speaks: Federal Reserve Bank of Dallas President Robert Kaplan will participate in a panel discussion on “Confidence in Uncertain Times”. Media and audience Q&A is expected. President Kaplan is a voting member of the FOMC this year. 09:15 AM Industrial production, December (GS +1.1%, consensus +0.6%, last -0.4%): Manufacturing production, December (GS +0.4%, consensus +0.5%, last -0.1%); Capacity utilization, December (GS 75.8%, consensus 75.4%, last 75.0%): We expect industrial production to rebound by 1.1% in the December report following two months of weakness, based on our expectation of a rebound in the weather-sensitive utilities category. 10:00 AM NAHB housing market index, January (consensus 69, last 70): Consensus expects the NAHB homebuilders’ index—which we have found to be a decent leading indicator of housing starts—to tick down to 69, though still near post-crisis highs. 11:00 AM Minneapolis Fed President Kashkari (FOMC voter) speaks: Federal Reserve Bank of Minneapolis President Neel Kashkari will give a speech on economic opportunity and inclusive growth at an event hosted by the Minneapolis Urban League. Audience and media Q&A is expected. President Kashkari will be a voting member on the FOMC this year. 02:00 PM Beige Book, January-February FOMC meeting period: The Fed’s Beige Book is a summary of regional economic anecdotes from the 12 Federal Reserve districts. The December Beige Book reported modestly slower activity in a few districts, stronger consumer spending and residential investment, and mixed manufacturing activity. In the January-February Beige Book, we will look for additional anecdotes related to the state of manufacturing activity, price inflation, and wage growth. 03:00 PM Fed Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Janet Yellen will give a speech on “The Goals of Monetary Policy and How We Pursue Them” in front of the Commonwealth Club of California in San Francisco. Audience Q&A is expected. 04:00 PM Total Net TIC Flows (last +$18.8bn) Thursday, January 19 08:30 AM Housing starts, December (GS +12.0%, consensus +8.6%, last -18.7%); Building permits, December (consensus +1.1%, last -3.8%): We expect housing starts to rebound 12% in December, following a 19% drop in November led by the volatile multifamily category. Despite colder-than-usual December temperatures, favorable single-family fundamentals and a rising backlog of approved permits suggest scope for a meaningful rebound. Consensus expects a more modest rise of 8.6% for housing starts and looks for a 1.1% increase in building permits. 08:30 AM Initial jobless claims, week ended January 14 (GS 265k, consensus 251k, last 247k); Continuing jobless claims, week ended January 7 (last 2,087k): We expect initial jobless claims to rebound 18k to 265k, following two consecutive readings not far from the cycle low. We remain in a period where seasonal adjustment is difficult, and we are hesitant to infer a drop in the trend pace of layoffs based on the most recent two reports. Seasonality-related uncertainty will affect the data for at least two more weeks, and accordingly, confidence around our 265k forecast is low. The drop in initial claims has not yet been mirrored in continuing claims, which have actually risen relative to the levels in early December (as of the week ending December 31). 08:30 AM Philadelphia Fed manufacturing index, January (GS +16.0, consensus +16.0, last +19.7): We expect the Philadelphia Fed manufacturing survey to pull back to +16.0 following last month’s increase to +19.7, remaining at levels signaling expansion in manufacturing activity. Last week, the Federal Reserve Bank of Philadelphia conducted its annual historical revision and calculation of new seasonal adjustment factors. For December, the index was revised down modestly to +19.7 from +21.5. 10:00 AM San Francisco Fed President Williams (FOMC non-voter) speaks: Federal Reserve Bank of San Francisco President John Williams will give the keynote address at the Solano Economic Development Corporation’s Annual Luncheon Meeting in Fairfield, California. Audience Q&A is expected. 08:00 PM Fed Chair Yellen (FOMC voter) speaks: Federal Reserve Chair Janet Yellen will give a speech on the economic outlook and US monetary policy at an event hosted by the Stanford Institute for Economic Policy Research. Audience Q&A is expected. Friday, January 20 09:00 AM Philadelphia Fed President Harker (FOMC voter) speaks: Federal Reserve Bank of Philadelphia President Patrick Harker will participate in a discussion on the economic outlook at the New Jersey Bankers Association’s 6th Annual NJ Economic Leadership Forum. Media Q&A is expected. Last week, President Harker reiterated his support for three rate hikes this year. 01:00 PM San Francisco Fed President Williams (FOMC non-voter) speaks: San Francisco Fed President John Williams will give closing remarks at the Bay Area Council Economic Institute’s 10th Annual Economic Forecast event in San Francisco. Audience Q&A is expected. Remarks will likely be similar to those from his speaking engagement on Tuesday. Source: BofA, DB, Goldman

08 января, 14:06

Procrastinating on January 8, 2017

**Over at [Equitable Growth](http://EquitableGrowth.org): Must- and Should-Reads:** * _Middle-Age Mortality_ * **Neel Kashkari**: _[Taylor Rule Would Have Kept Millions Out of Work][]_: "Forcing the Federal Open Market Committee (FOMC) to mechanically follow a rule, such as the Taylor rule... * **Jonathan Bernstein**: _[Republicans Really Can Pretend to Repeal Obamacare][]_: "Sarah...

07 января, 21:17

Fed's Kashkari says he's optimistic about bank plan under Trump

CHICAGO (Reuters) - Neel Kashkari, the president of the Minneapolis Federal Reserve Bank who wants to force U.S. banks to hold more capital in order head off a future financial crisis, on Saturday said he was optimistic about his plan's chances under incoming president Donald Trump.

07 января, 05:10

The Case Against Fed Reform

Submitted by Tho Bishop via The Mises Institute, This week the 115th Congress was sworn in, and there are some indications that Fed reform may be on the agenda. The combination of populist anger fueled by Ron Paul’s Presidential campaigns and the 2008 financial crisis coupled with the repeated failings of the Federal Reserve to meet their projections has created a rare window for monetary policy to be both politically advantageous, as well as so obviously needed that even politicians can see it.   The question now is what sort of reform is on the table. Congressional Reforms Last Congressional session saw proposals from both the House and the Senate.   From the House we have the FORM Act, which would require the Fed to adopt a monetary policy rule and explain to Congress whenever they deviate from that rule. The FORM Act also calls for an annual GAO audit of the Federal Reserve, doubles the number of times the Fed Chairman testifies before Congress, and makes some other tweaks to the makeup and protocol of the Federal Reserve Board. Since the FORM Act passed the House in 2015, there is a good chance we will see it resurrected in 2017. On the Senate side, Banking Committee Chairman Richard Shelby has pushed for the Financial Regulatory Improvement Act. Not only does it lack a catchy acronym, but its reforms to the Fed are far more modest than the FORM Act. The meat of the bill focuses on changes to the Fed board. The head of the New York Fed would no longer be appointed the banks board of the directors, but would instead be nominated by the President and confirmed by the Senate – just like the Federal Reserve Chairman. It would also grant powers to the Fed’s regional presidents that currently only reside with the board of directors. Though early drafts of the Senate bill called for the Fed to adopt rules-based monetary policy, this ended up being stripped from the final proposal due to Democratic opposition – largely because much of the Hill focus has been on the Taylor rule, which many Fed advocates fear is too restricting. The Battle Over the Taylor Rule Recently this debate has played out in the pages of the Wall Street Journal with Neel Kashkari and John Taylor exchanging op-eds on the virtues of rules-based policy. Though Kashkari begins with a broad attack on monetary rules, it quickly devolves into a focused attack on the Taylor Rule which he argues “effectively turn[s] monetary policy over to a computer, rather than continue to let Fed policy makers use their best judgment to consider a wide range of data and economic trends.” Of course Kashkari ignores that the “best judgement” of Fed policy makers has been widely criticized – and not just by Austrians who oppose any sort of Fed policy at all. Kashkari’s allusion to a computer-guided monetary policy is may be an attempt to get readers to conflate recent monetary rules proposals to the views of Milton Friedman that have not aged particularly well. In Taylor’s response, he criticized the portrayal for being dishonest while pointing to various analysis critical of the Fed behavior since the crisis. What’s more interesting than the finer details of the debate over the relative virtues of the Taylor rule is how that specific proposal has largely been the single focus of those critical of rules-based policy. Though support for the Taylor rule has become largely split on partisan lines, there is another monetary rule that has growing support from across the ideological spectrum. The Appeal of NGDP Targeting Following 2008, NGDP targeting has grown from a topic of conversation largely limited to blogs such as Scott Sumner’s The Money Illusion, to something discussed openly among central banks, prominent publications, and even Presidential candidates. The proposal would require a central bank to set a nominal goal for GDP – without taking into account inflation or deflation – and allow it to use a variety of tools to reach that goal. Since the policy gives Fed critics a black and white standard to measure its performance, without putting too many restrictions on the Fed as to ruffle the feathers of Fed proponents, it has been able to build a broad coalition of support. As a result, you have progressives such as Christina Romer and Brad DeLong on the same side as the Cato Institute and the Mercatus Center. Of course widespread appeal is not the same thing as sensible policy. As Shawn Ritenour sums up his brilliant refutation of the proposal: NGDP targeting advocates end up fostering the monetary illusion that scarcity can be overcome and prosperity can be achieved via monetary inflation. Unfortunately policy does not have to be sensible to become reality. Should the House succeed in creating pressure on the Senate to act on a version of the FORM Act, it would not be surprising to see the discussion move away from the Taylor rule to NGDP targeting – with advocates selling its broad appeal as its leading virtue. The Fed Audit, which has consistently been fought by the Senate, could easily be dropped – with Republican legislators being able to point to the endorsement of the beltway’s leading libertarian think tanks as evidence of being tough on the Fed. The Real Problem with Rules-Based Monetary Policy Of course no matter if it is NGDP targeting, the Taylor rule, or even a rule that would have the Fed tie itself to gold – the entire debate about rules-based monetary policy ignores the obvious: rules are meant to be broken. We’ve already seen this play out routinely at the Fed, with both sides of the isle usually accusing the Fed of not upholding one side of its current dual mandate. History is littered with examples of government financial institutions ignoring and modifying rules whenever they directly conflict with the judgment of current leaders. As recently as 2015, the IMF arbitrarily changed a long-standing policy on loan requirements so it could help Ukraine. The US government changed long-standing monetary policy rules when faced with a crisis, such as when it cut the dollar’s connection with gold for both domestic and international payments. Be it Constitutional rights, contractual obligations, or its own self-imposed rules, when push comes to shove the government officials have proven they will side with their own judgment – no matter what the rule is. So while there are certainly arguments to be made in favor of a rules-based Fed over the pure discretion of the current PhD standard, such reform should not be viewed as a solution to the real issue, which is a central bank having a monopoly on money at all. Instead of a Fed reform, we need Fed competition: eliminate legal tender laws, remove the burdensome taxes placed on gold, Bitcoin and other potential currencies, and give Americans a true alternative to Federal Reserve notes for those who want it. Anything short of that continues to let the Fed’s monopoly on money continue, and is therefore no real solution at all. 

06 января, 19:36

Без заголовка

**Should-Read:** If the unemployment rate had averaged 1.5% points higher over the past four years, how much lower would inflation be now? That depends on your estimate of the slope of the Phillips Curve. [Blanchard][] tells us that it is currently about 0.18 in the unemployment version of the Phillips...

03 января, 09:45

С 1 января 2017 года произошли изменения в голосующем составе ФРС

В новом 2017 году в голосующем составе ФРС произошли изменения. Теперь не будут иметь права голоса Джеймс Буллард (Сент-Луис), Эстер Л. Джордж (Канзас-Сити), Лоретта Мейстер (Кливленд), Эрик Розенгрен (Бостон). На их место пришли Чарльз Л. Эванс (Чикаго), Патрик Харкер (Филадельфия), Роберт С. Каплан (Даллас), Нил Кашкари (Миннеаполис). Информационно-аналитический отдел TeleTradeИсточник: FxTeam

02 января, 15:50

Links for the Week of January 8, 2017

**Most-Recent Must-Reads:** * **Noah Smith**: _[Who Is Responsible When an Article Gets Misread?][]_: "How much of the responsibility for understanding lies with the writer of an article, and how much with the reader?... * **Nicholas Bloom et al.**: _[Are Ideas Getting Harder to Find?][]_: "In many growth models... the long-run...

24 декабря 2016, 00:30

Dave Collum's 2016 Year In Review - "And Then Things Got Really Weird..."

Submitted by Dave Collum via PeakProsperity, A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline. Background: The Author “The easiest thing to do on earth is not write.” ~William Goldman, novelist I never would have believed it—not in a million years—but it happened: the Cubs won the World Series, and The Donald is our new president. Every December, I write a Year in Review1 that’s first posted on Chris Martenson’s & Adam Taggart’s website Peak Prosperity2 and later at Zero Hedge.3 What started as a few thoughts posted to a handful of wingnuts on Doug Noland’s Prudent Bear message board has mutated into a detailed account of the year’s events. Why write this beast? For me, it puts the seemingly disconnected events that pass through my consciousness, soon to be lost forever, into a more organized and durable form. Somebody said I should write a book. I just did. In a nutshell, this is a story of human follies and bizarre events. There are always plenty of those. Let others tell the feel-good stories. Figure 1. Malcolm McDowell as Alex in A Clockwork Orange. I try to identify themes that evolve. This year’s theme was obviously defined by the election, which posed a real problem. I struggled to detect the signals through the noise. Many of my favorite analysts from whom I extract wisdom and pinch cool ideas spent the year trying to convince the world that one or more of the presidential candidates was an unspeakable wretch. I was groping for a metaphor to capture our shared experiences, rummaging through Quentin Tarantino scripts and Hieronymus Bosch landscapes for inspiration. “Rise of the Deplorables” was tempting. Then it clicked. The term “clockwork orange” is a Cockney phrase indicating a bizarre incident that appears normal on the surface. The phrase was commandeered as the title of a 1971 dystopian film in which Malcolm McDowell’s character Alex is brainwashed by being forced to watch the most grisly and horrifying of spectacles (Figure 1). For us, it was the 2016 presidential election, which created a global mind-purging brain enema. The horror! The horror! (Oops. Wrong movie.) I knew in January that by mid-November we would be unified by our collective distrust of the Leader of the Free World, who would be surrounded by a dozen chalk outlines corresponding to political corpses that nobody wished to resurrect. I have done my best to not marinate you—too much—in tales of sociopathic felons or stumpy-fingered, combed-over letches. I do, however, eventually enter the Swamp. By way of introduction, my lack of credentials—I am an organic chemist—has not precluded cameos in the Wall Street Journal,4 the Guardian,5 Russia Today,6,7,8 a plethora of podcasts,1 and even a couple investment conference talks. Casting any pretense of humble bragging aside, let’s just post this year’s elevator résumé and a few endorsements to talk my book. “We live in a world where some of the best commentary on the global financial markets comes from a frustrated chemistry professor.” ~Catherine Austin Fitts, former Assistant Secretary of Housing, former Dillon, Reed & Co., and current president of Solari9 One of the high-water marks was sharing the spotlight with Mark Cuban in a Wall Street Journal article by Ben Eisen on nouveau gold buggery:10 “Dave Collum . . . has been adding to his holdings of physical gold this month, citing, among his concerns, negative interest rates and the growing refugee crisis in Europe. ‘I’m getting apocalyptic,’ he said.” ~Ben Eisen, Wall Street Journal Podcasts in 2016 included Wall St. for Main St.,11 Macro Tourist Hour (BTFD.TV),12 The Kunstlercast,13 Five Good Questions,14 FXStreet,15 and, of course, Peak Prosperity.16 Dorsey Kindler, of a small-town newspaper, the Intelligencer (Doylestown, PA), interviewed me about college in an article titled, “The New McCarthyism” and, in an ironic twist, was soon thereafter fired and his content purged.1 An interview for the Cornell Review, a right-wing student newspaper considered a “rag” by the liberal elite, probed college life and the new activism.17 A cross-posting at Zero Hedge got the Review’s click counts soaring.18 Finally, I chatted on local radio about real estate, the bond market, Hillary, and other rapidly depreciating assets.19 “If you reflect on Prof. Collum’s annual [review], you will realize how far removed from the real world and markets you are. This is a huge deficiency that all of you must work on correcting.” ~Professor Steve Hanke, economist at Johns Hopkins University, in a letter to his students Contents Footnotes appear as superscripts with hyperlinks in the Links section. The whole beast can be downloaded as a single PDF xxhere or viewed in parts via the linked contents as follows: Part 1 Background: The Author Contents Sources On Conspiracy Theorizing Investing U.S. Economy Broken Markets Cash on the Sidelines Pharma Phuckups Gold Energy Real Estate Debt Pensions Inflation/Deflation The Bond Caldera ZIRP and NIRP War on Cash Banks and Bankers The Fed European Central Bankers Europe Brexit Refugee Crisis References Part 1  Part 2 Putin and Russia South America China Japan Middle East Government Folly Panamania Human Achievement Human Folly Civil Liberties Campus Politics Elections Rigged Primaries: RNC Division Rigged Primaries: DNC Division Bernie Hillary Clinton Trump Media Conclusion Books Acknowledgments References Part 2 For historical reasons, the review begins with a survey of my perennial efforts to fight the Fed. I am a fan of the Austrian business cycle theory and remain hunkered down in a cash-rich and hard-asset-laden Bunker of Doom (portfolio). The bulk of the review, however, is really not about bulls versus bears but rather human folly. The links are as comprehensive as time allows. Some are flagged as “must see,” which is true only for the most compulsive readers. The quote porn is voluminous: I like capturing people’s thoughts in their own voices while they do the intellectual heavy lifting. I try to avoid themes covered amply in previous reviews. Some topics resolve themselves. Actually, none ever do, but they do get boring after a while. Others reappear with little warning. Owing largely to central banking largesse, the system is so displaced from equilibrium that something simply has to give, but I say that every year. We seem to remain on the cusp of a recession and the third, and hopefully final, leg of a secular bear market that began in 2000. Overt interventions have kept the walking dead walking. The bulls call the bears Chicken Littles and remind us what didn’t happen. One of my favorite gurus reminds us of a subtle linguistic distinction: “Didn’t is not the same as hasn’t.” ~Grant Williams, RealVision and Vulpes Investment Management I finish with synopses of books I’ve read this year. They are not all great, but my limited bandwidth demands selectivity . They are all nonfiction (to varying degrees). I don’t have time to waste on 50 Shades of Garbage. Sources “As for the national press corps—the Fourth Estate—it has been compromised, its credibility crippled, as some of the greatest of the press institutions have nakedly shilled for the regime candidate, while others have been exposed as propagandists or corrupt collaborators posturing as objective reporters.” ~Pat Buchanan, syndicated columnist and senior advisor to presidents With some notable exceptions, the mainstream media has degenerated into a steaming heap of detritus that is so bad now that it gets its own section. A congenital infobesity has morphed into late-stage disinfobesity. Enter social media—the fever swamp—to fill the void. As we shall see, however, all is not well there either. I sift and pan, looking for shiny nuggets of content that reach the high standards of a rant. Shout-outs to bloggers would have to include Michael Krieger, Charles Hugh Smith, Peter Boockvar, Bill Fleckenstein, Doug Noland, Jesse Felder, Tony Greer, Mike Lebowitz, Mish Shedlock, Charles Hugh Smith, and Grant Williams. News consolidators and new-era media include Contra Corner,20 Real Vision,21 Heatstreet,22 and Automatic Earth.23 A carefully honed Twitter feed is a window to the world and the road to perdition. My actions speak to my enthusiasm for Chris Martenson and Adam Taggart at Peak Prosperity.24 However, if you gave me one lens through which to view the world, I would have to choose Zero Hedge (or maybe LadySonya.com). “You really should be keeping a journal because you are living through momentous times.” ~Chris Martenson, Peak Prosperity On Conspiracy Theorizing “I stopped believing in coincidences this year.” ~Scott Adams, creator of Dilbert Every year I shout out to conspiracy theorists around the world. I am not talking about abductions by almond-eyed aliens with weaponized anal probes (which really hurt, I hasten to add) but rather the simple notion that sociopathic men and women of wealth and power conspire. Folks who could get through 2016 without realizing this are imbeciles. I am talking totally blithering idiots. Markets are rigged. Government stats are cooked. Interest rates are set by fiat. Polls are skewed. E-mails are destroyed. Cover-ups abound. Everybody has an agenda. Watch this d-bag at one of the neocon think tanks—somehow so stupid as to not realize he’s being recorded—talk about how false-flag operations are commonplace.25 Meanwhile, the media conspires to convince us to the contrary. The folks who really piss me off, however, are the glib intellectuals—Nassim Taleb calls them “intellectuals yet idiots” (IYIs)—who suggest that conspiracy theorists are total ret*rds.26 (Saved by the asterisk, which baffles the sh*t outta me why that works.) Does it seem odd that the world’s most prominent detractor of conspiracy loons, Harvardian Cass Sunstein,27 is married to neocon Samantha Power,28 one of the great conspirers? It does to me, but I am susceptible to such dietrologie. “Popular opinions, on subjects not palpable to sense, are often true, but seldom or never the whole truth.” ~John Stuart Mill Many will try to shut down open discussions of ideas displaced from the norm by using the word “conspiracy” pejoratively. Their desire for the world to be normal is an oddly child-like cognitive dissonance. In that event, lean over and whisper in their ears, “Keep your cognitive dissonance to yourself, dickweed” while gently nudging them in the groin with your knee. Now, let’s pop a few Tic Tacs, grab a clowder, and get on with the plot, but first . . . *Trigger Warning* If this review is already too raw for your sensibilities, please stop reading. Nobody is making you squander your time on a socially marginal tome of questionable merit. Better yet, seek professional help. Investing “If you pay well above the historical mean for assets, you will get returns well below the historical mean.” ~Paraphrased John Hussman Read that over and over until you understand it. Changes in my 2016 portfolio were more abrupt than those from other years but still incremental. I resumed purchasing physical gold in 2015 after a decade-long hiatus. In 2016, I bought aggressively in January (the equivalent of half an annual salary) and continued incremental buying throughout the year (another half salary). My total tonnage (OK, poundage) increased by an additional 5% of my assets. My cash position shrunk by about 5% accordingly but remains my largest holding. I am in no rush to alter the cash position. For a dozen years, I have been splitting my retirement contributions into equal portions cash and natural gas equities. The latter keeps failing to attain an approximate percentage goal of 25–30% of my assets owing to market forces. My approximate positions are as follows: Precious metals etc.:                27% Energy:                                    12% Cash equivalent (short term):   53% Standard equities:                    8% The S&P, despite a late year rally incorrectly attributed to the Trump victory, appears to be running on fumes or, as the big guns say, is topping. The smart guys (hedge fund managers) continue to underperform, which means the dumb money must be overachieving (blind nuts finding squirrels). This is never a good sign. “We should all own cash, because it is the most hated asset.” ~Jim Rogers, Rogers Holdings and Beeland Interests “The great financial success stories are people who had cash to buy at the bottom.” ~Russell Napier, author of Anatomy of the Great Bear (2007) “Cash combined with courage in a time of crisis is priceless.” ~Warren Buffett, Berkshire Hathaway Figure 2. Performances of GLD, SLV, XAU, XLE, XNG, and S&P. After a few years of underperformance resulting from the oil and gold drubbing, large gains in the gold equities (60%), gold (6%), silver (15%), generalized energy equities (10%), and natural gas equities (48%) shown in Figure 2 were attenuated by the huge cash position to produce a net overall gain in net worth of 9%. This compares to the S&P 500 (+10% thanks to a hellacious late year rally) and Berkshire Hathaway (25%, wow). (Before you start brain shaming me, that same cash buffer precluded serious percentage losses during the hard-asset beatings in the preceding years.) The most disappointing feature of the year was in the category of personal savings. I have managed net savings every year, including those that included paying for college educations. This year, however, began poorly when my gold dealer got robbed and lost my gold. My losses paled in comparison to his; he committed suicide. I discovered maintenance needs on my house that got really outta control, and a boomerang adult child ended up costing me a bit. All told, I forked over 50% of my annual salary to these unforseeables, which turned overall savings negative (–20% of my salary) and eroded a still-decent annual gain in net worth. Oh well, at least I have my health. Just kidding. I have a 4 centimeter aortic aneurysm, am pissing sand, and have mutated into Halfsquatch owing to congenital lymphedema (Figure 3). (I live-Tweeted a cystoscopy—likely a first for social media.) I have to keep moving here to finish before I pass my expiration date. Figure 3. Sand and Stump. In a longer-term view, large gains in total net worth (>300%) since January 1, 2000 are still fine. I remain a nervous secular precious metal bull and confident equity secular bear. I intend to put the cash to work when Tobin’s Q, price-to-GDP, price-to-book, and Shiller PE regress to and through the mean. When this will occur is anybody’s guess, especially with central bankers determined to make me pay for “fighting the Fed.” I will start buying after a 40% correction brings the S&P to fair value, keep buying as it drops below fair value, and wish I had saved my money by the secular bottom. We return to all this in Broken Markets. Here’s what my dad taught me: you need cash at the bottom to buy up cheap assets. Few will have cash because you have to go to cash at the top, and precious few have the capacity to shake recency bias and exit positions that have performed well. Just like a toaster, your sell order has only two settings: too soon and too late. My far greater concern is that bear markets are as much about time as they are about inflation-adjusted price. The Fed is determined to burn the clock. Nobody wins if we imitate Japan’s 25-year lost decade. “Time takes everybody out. It’s undefeated.” ~Rocky Balboa U.S. Economy “The word ‘maximum employment’ has this connotation that everything is good in the labor market, but everything is not great in the labor market.” ~Loretta Mester, president of the Cleveland Federal Reserve Unemployment is at 4.9%—what’s not to like? Economists have even claimed the “labor market is getting tight.” I scoff. The labor participation rate shows that 38% of working-age adults are not working (Figure 4). Apparently, 33% of working-age adults are neither employed nor unemployed. Hmmm . . . even that’s a little optimistic given that only 50% of adults are employed full-time. The millennials are getting whacked by the boomers who refuse to die (sorry, retire). Figure 4. Unemployment (left; official stats in red; Shadowstats in blue) and labor force participation rate (right). The wealth for middle-class households has dropped 30% since 2000;29 One in five kids lives in poverty,30 46 million folks are on food stamps;31 20% of the families have nobody employed32 (despite the 4.9% number); and almost 50% of all 25-year-olds are living with mom and dad unable to translate that self-exploration major into a job.33 Half of all American workers make less than $30,000 a year.34 The once-industrial-juggernaut Rochester of Kodak/Xerox fame has more than 30% of residents living in poverty and another 30% living with government assistance.35 Very Detroit-like but without the Aleppo motif. You can see it in the micro if you drill down. Deindustrialization has been occurring steadily since the late 90s.36 The mining industry lost more this year than it made in the last eight years.37 Sales of industrial-strength trucks have been “dropping precipitously.”38 Sales in general are looking very ’09-ish. Factory orders and freight shipping (Cass Freight Index) have been dropping for two years.39 Catherine Mann of the OECD says that “In terms of actual trade growth, it is extremely grim.” The CEO of Caterpillar finally cashed in his chips after 45 contiguous months of dropping sales.40 Commercial bankruptcies are up 38% year over year,41 whereas 62% of Americans have less than $1,000 in savings.42 It seems unlikely the consumer will be buying bulldozers and 18 wheelers in the near future. “This turns out to be the deepest and most protracted growth shortfall on record for the modern-day global economy.” ~Stephen Roach, Yale professor and former chairman and chief economist at Morgan Stanley The economy is in the weakest post-recession recovery in half a century despite protestations to the contrary by Team Obama.43 The 2%-ish growth rate since ‘09 feels like a recession, especially given specious inflation adjustments to get 2%. There isn’t a wave of job cuts yet, but some signs are worrisome. Cisco Systems laid off 20% of its workforce.44 GE cut 6,500 jobs.45 Despite gains in non-GAAP earnings, GE’s GAAP earnings—the non-fabricated earnings—plunged.46 Intel dumped 11% of its workforce but faked a win by dropping its assumed tax rate by 7%.47 This tactic smacks of the same old financial engineering, but maybe it is headed for nonprofit status. One bright spot: the $15 billion vibrator industry is set to grow to $50 billion,48 satisfying consumers in a manufacturing–service industry combo. Speaking of stimulus, what the hell went awry? The Feds drilled the rates to zero (creating a ginormous bond bubble; vide infra) to encourage consumers to do the one thing they cannot afford to do—consume. Global central bankers have cut rates every 3 days since 2008 according to Grant Williams.49 The central bankers dumped tens of trillions of dollars—trillions with a “t” that comes right before gazillions with a “g”—into the global economy. The answer is simple and foreshadowed above: once you blow up a credit bubble, you cannot force consumers to spend. Have ya heard people talking about pulling equity out of their houses lately? Didn’t think so. That numbnut idea proferred by the incoherent Alan Greenspan left consumers with the same houses and twice the debt while poverty-stricken old age looms large. “If a consumer buys a boat today with money made available through a low-interest loan, that’s a boat he won’t buy next year.” ~Howard Marks, Oaktree Capital and Three Comma Club (billionaire) “The decline of the middle class is causing even more economic damage than we realized.” ~Larry Summers, speaking for himself with the royal “we” How could the economists have been so wrong? I have a remarkably simple theory: their models are wrong. They suffer so badly from Friedrich Hayek’s “fatal conceit” that they have become functional nitwits. That’s the best I’ve got. One could argue we have a secular economic problem. As a nation, we exploited cheap labor overseas through immigration during the 16th–20th centuries. The immigrants worked like dogs, got paid squat, and saved so furiously that it became a lot more than squat. Thomas Sowell explains this brilliantly in his writings.50 For the last few decades, however, we exploited cheap overseas labor by exporting jobs. They too worked like dogs, got paid squat, and saved furiously. But that wealth is not here; it’s over there (pointing east). Will new and improved trade policies solve our (U.S.) problems? I don’t think so. As long as there are folks overseas willing to work harder for less, we have some correcting left to do. With that said, I am a free-trade guy and particularly like the trade agreement painstakingly crafted by Mish Shedlock: “Effective immediately, all tariffs and subsidies, on all goods and services, are removed.” ~Mish Shedlock (@MishGEA), blogger How about some more Keynesianism? Former economist Paul Krugman, whose op-eds read like episodes of Drunk History, would say we simply haven’t done enough. (Paul: you have done more than enough.) Modern-day Keynesianism has mutated way past Maynard’s original idea into an unrecognizable metaphysical glob of thinking that boils down to the notion that government knows how to spend better than the private sector does. Is this the same government that included Anthony Weiner, Rick Santorum, and Barbara Boxer? Here is Keynesianism I could live with. Government should spend as little as possible, but there are legitimate roles to be played. Imagine if governments at all levels would simply act like financially interested parties—as a collective, not as slovenly greedy, bribery-prone individuals—and buy necessary goods and services when they are cheap and stop buying when the private sector has bid them up. We would get maximum bang for the tax buck. It would also quite naturally achieve the much ballyhooed counter-cyclicality. But, alas, the moment they start talking “stimulus,” the pay-to-play crowd turns it into a fiasco. As my dad once said, “Never ask government to do anything they don’t have to do, because they will do a terrible job.” Words from the wise. Broken Markets “I don’t think a single trader can tell you what the appropriate price of an asset he buys is, if you take out all this central bank intervention.” ~Axel Weber, former head of the Bundesbank “My thesis now is that central banks believe they can prop up asset prices through a downturn in the business cycle.” ~@TheEuchre Whomever @TheEuchre is, I think that is a provocative alternative theory of Fed motivation. Moving along, we seemed to be on the cusp of a recession last year with a number of valuation indicators pointing to a +40% correction simply to regress to the mean. In the absence of such a correction (check) and the absence of explosive growth (check), we are still looking over the precipice (check). Luminaries like Stanley Druckenmiller, George Soros, Sam Zell, and Bill Gross are calling for a zombie apocalypse at some unknowable future date. Paul Tudor Jones appears to be wrapping up in a way that smacks of Julian Robertson’s Tiger Management hedge fund liquidation in ’99. Harvard’s Martin Feldstein says asset prices are “dramatically out of line.” Credit Suisse sees analogies to the tech bubble, whereas Ned Davis Research suggests, “on a revenue basis, U.S. stocks are as expensive as they have ever been.” Chart guru Doug Short created a simple model that averages four common equity valuation techniques (Figure 5). Based on his analysis, the market is 76% overvalued compared with the average dating back to 1900. (Note: a 76% overvaluation is regressed to the mean by a 43% correction, which will be as pleasant as baptizing a cat.) Figure 5. Doug Short composite valuation model. At these valuations, a few shanks at the start of the year were scary, but soon the markets entered the tightest 40-day trading range (2.27%) in more than 100 years—the Horse Latitudes.51 There were a few goofy IPO crack-ups but they stayed subclinical. Even flash crashes raised only a few eyebrows. Knee-slappers elsewhere included a crash of the British pound in the forex markets in under a minute owing to Brexiteers52 (vide infra) and a 6.7% crash in China in less than a minute.53 The misnamed Trump rally—misnamed because it began three days before the election—left some serious skid marks, elevating the market 8% in only a few weeks. This was a short squeeze in conjunction with . . . I don’t really know. It is suggested that central banks and programmed investing have pushed a wall of money at the markets. This credit-based splooge corresponds to debts to be paid back later, but who cares? Over 10,000 mutual funds and exchange-traded funds (ETFs) are feeding off only 2,800 issues on the NYSE. There are now almost twice as many hedge funds as there are Taco Bells54 (which won’t be growing under a Trump presidency). I get a little confused as reported outflows in both equity funds and money market funds argue the contrary. (Even these claims are confusing given that buyers necessarily match sellers; vide infra.) “[I]t’s monetary policy we demonstrate is driving everything. And yet here too, there are worrying signs of what may become a breakdown.” ~Matt King, Citigroup Stock buybacks—in many cases leveraged stock buybacks—continue to levitate the markets. For those not paying attention, companies borrow money to buy back shares to prop up share prices, which serves the dual role of maximizing year-end bonuses and wards off balance sheet crises. Now my head hurts. Baker Hughes announced a $1.5 billion share buyback and $1 billion of debt issue. In the first half of 2016, S&P 500 companies “returned” 112% of their earnings through buybacks and dividends.55 Returned? There is some evidence that buybacks may be subsiding. When they stop buying shares at all-time highs—“buying high”—and their investment unwinds while crushing corporate debt persists, companies will be doing “dilutive share issuance” at fire sale prices—“selling low.” For now, corporate balance sheets hold the dumb money. “The corporate sector today is stuck in a vicious cycle of earnings management, questionable allocation of capital, low productivity, declining margins and growing indebtedness.” ~Stanley Druckenmiller, former head of Duquesne Capital and rock star There are instances of generic idiocy emblematic of deep problems. Eighty-five percent of traders on Wall Street have less than 15 years of experience. Synthetic securitizations are returning.56 Are buyers being paid for the risk? Some have suggested that retail investors should stay away from these (and Fukushima). A managed futures fund was launched by a 17-year-old kid who may not have made it to third base yet.57 A 28-year-old Ukrainian hacker got caught making over $30 million on insider information.58 If he were a bank, he’d have been fined $100K. The “head” of the collapsed Visium Asset Management hedge fund killed himself by slicing his own neck.59 Right. Platinum Partners appears to have been running a Ponzi scheme.60 Vegan food start-up Hampton Creek used $90 million in “seed” money to buy its own products (probably seeds) to generate fake “organic growth.”61 Nintendo spiked on the release of Pokémon, which caused hoards of idiots to chase digital critters to stupid places.62 Even though Nintendo fessed up that their bottom line would not be improved by the craze, some of the gains have stuck as investors keep chasing those digital share prices to stupid places. “Markets don’t have a purpose any more—they just reflect whatever central planners want them to. Why wouldn’t it lead to the biggest collapse? My strategy doesn’t require that I’m right about the likelihood of that scenario. Logic dictates to me that it’s inevitable.” ~Mark Spitznagel, Universa Investments Cash on the Sidelines “Preliminary attempts to clean it up fail as they only transfer the mess elsewhere.” ~Wikipedia on the bathtub ring in The Cat in the Hat In 2011, I used that quote in a different context, but it is a great articulation of the Law of Conservation of Mass.63 There are a lot of memes in the investing community—pithy phrases and ideas for which tangible support is weak or nonexistent. One is the merits of “cash on the sidelines” and its kissing cousin, money “flowing” in and out of asset classes. In the late ‘90s, I tried to ascertain how much cash was generated in sell-offs and soon realized the answer was zero. Others such as Lance Roberts,64 John Hussman,65 Cliff Asness,66 and Mish Shedlock67 have dismembered putty-headed thinking underlying cash on the sidelines. However, there are pockets of holdouts (mostly on CNBC) who subscribe to the flow model. You can hear Maria saying it: “There is so much cash on the sidelines waiting to go into equities.” I am going to take one last crack at it with the aid of some graphical wizardry and grotesque oversimplification. “So if money is coming into the market, where is it going to find a home?…What’s going to get it into the market?” ~CNBC Fast Money Here is the problem with the meme in a nutshell: If I buy, somebody must sell. It’s the Law of Conservation of Cash. If I grab a stack of Tubmans ($20 bills) and buy NFLX, the former owner of NFLX now has the Tubmans, and I have the overpriced shares. Do that all day long, and the cash on the sidelines doesn’t change; it moves around like the bathtub ring. Mutual funds insert middlemen to skim cash, but still no money is destroyed or created. Breathless claims that money is flowing in or out of mutual funds sounds important, but where in this model is cash created or destroyed? The percentage of cash, however, is a huge issue. Let’s look at this graphically and restrict it to a simple binary model (Figure 6). Imagine there is $100 trillion in cash globally and $100 trillion of market cap in equities. Of course different investors have different allocations, but investors have collectively decided that they wish to own 50% cash and 50% equities (labeled 50:50). Figure 6. Equity-to-cash allocations in a non-inflationary world. In a non-inflationary banking system, the cash is static. Along comes legendary wise man John Bogle declaring equities reward risk taking, we should weight our portfolios 60:40, and the world agrees. Investors will bid up equities to higher valuations until, collectively, equities reach the 60:40 proportion for a satisfying 50% gain exclusively through expansion of the numerator. Legendary raging bull Laszlo Birinyi, guided by recency bias, convinces the world stocks are great investments and suggests 80:20 as the right allocation. Investors collectively agree, and they bid shares higher, which completes an overall 300% equity gain from the conservative days of 50:50 allocations. Now we’re rocking! We are just beginning to pull stupidity forward. Jeremy Siegel, self-appointed guru and demagogue, says you simply can’t lose, so you should be 90% stocks, and the world listens because this particular baitfish-smart analyst stays at Holiday Inns and is from Yale! The market has now lost all moorings, pushing the overall gains to 800%! Of course, now cash is trash and investors strive to be 100% in equities. Equity investors now “reach out and touch the face of God” because the prices are heading for infinity. Alas, The Bear appears before that can happen—it always does. It doesn’t have to be an axle-breaking speed bump. The proximate trigger is not important. Spooked investors drop their allocations back to 60:40 and, in the depths of despair, back to 50:50. You will then scoop up cheap equities with inverted baggies from disembowled, toe-tagged investors who need cash. We gave the gains all back . . . or did we? During this round trip, society collectively learned to make goods and provide services much more efficiently. The same amount of effort—the same amount of cash—corresponds to a much higher standard of living. This is good deflation, the kind that James Grant describes because he reads the dusty archives from bygone eras. Most economists nowadays endorse low inflation that roughly matches productivity growth, which causes both the cash and the market cap (equities) to drift gently upward in a feel-good money illusion.68 Don’t we need inflation for growth? Only if you believe the industrial revolution of the nineteenth and early twentieth century was disappointing. For the first half of the twentieth century, the DOW rose 1.3% nominally per annum. However, the modern banking system is most definitely inflationary. Money is created by increased leverage of all kinds—sovereign debt, consumer debt, quantitative easing (QE), and helicopter money all grow the money supply. They grow the denominator (cash) in Figure 6, which is inflation. The overarching model guiding the Fed’s policies seems to be that increasing the denominator will nonlinearly increase the numerator. As inflation lifts equities, animal spirits take hold (the Wealth Effect) and lift them even more. We will go through the four stages of bullishness: Bogle-Birinyi-Siegel-God. The gains will be illusory because real wealth is manufactured, farmed, mined, and maybe programmed. Central bankers will always do something; sitting on their hands (or thumbs) is unnatural. When the markets de-lever, however, cash leaves the system. Business and investing models demanding inflation begin to break. This is bad deflation. It is harsh, abrupt, and dreaded by central bankers, because it is largely their doing. Pharma Phuckups “If you think health care is expensive now, wait until you see what it costs when it’s free.” ~P. J. O’Rourke, conservative columnist There seemed to be an epidemic of flatliners in the pharmaceutical industry requiring quarantine (its own section). The big one was Theranos, a company based on miraculously effective lab tests that turned out not to really work.69 The company was quietly outsourcing to labs whose tests did work. When the scam was revealed, the wunderkind CEO, Elizabeth Holmes, watched her Forbes-estimated net worth drop from $4.5 billion in 2015 to “$0” in 2016.70 The corporate digital exam would be familiar to her distant relative John Holmes. Mylan suffered an optics problem when the disappearance of a key competitor allowed it to take a cue from pharma scoundrel Martin Shkreli71 and jack up its EpiPen price 500%,72 which smacked of price gouging. Mylan was protected by government intervention when Teva was denied rights to make a competing product.73 Such mischief in the generic drug market is real. The feds also mandated stocking EpiPens in all schools.73 A million bucks of lobbying money well spent.74 An ode to my new EpiPen It used to cost one, now it’s ten Our merchants of greed Are cheeky indeed These grifters are at it again ~@TheLimerickKing Valeant Pharmaceuticals also reported big losses following big gains. Criminal investigations into Valeant took it 90% off its recent highs (a “tenth bagger”).75 Meanwhile, drug giant Eli Lilly’s share price Felt the Bern in the fall when Bernie Sanders tweeted concerns about the price of insulin rising 700% in 20 years.76 The big-cap drug scoundrels have also been accused of fabricating an ADHD epidemic and causing a global prescription drug addiction. A drum beat to restrain pain meds is getting very loud. Chronic pain patients watch with angst. “Recovery is living long enough to die of something else.” ~Dr. Howard Wetsman (@addictiondocMD), chief medical officer, Townsend Addiction Treatment Centers Oh, those bastards, right? Well, maybe not. I’m gonna take a crack at defending the industry. Mylan has been dead money for 20 years—zero percent return ex-dividends and ex-inflation. The same is true for Merck, Pfizer, Eli Lilly . . . I could go on. Former antimicrobial juggernauts Eli Lilly and Bristol-Myers Squibb are exiting the antibiotic market because they can’t pay the utility bills with the proceeds. You should worry. “Drug corporations’ greed is unbelievable. Ariad has raised the price of a leukemia drug to almost $199,000 a year,” ~Bernie Sanders Tweet, dropping the shares 20% on the day Where are all the revenues going? Really expensive research and development. Better meds make the world a better place. The life expectancies of AIDS patients with treatment are now three years below those of their uninfected peers. Wow. New-era cancer cures are off-the-charts effective. Pharma creates wealth in the purest sense and employs millions of people. On my consulting gigs, I can see researchers diligently trying to cure major diseases. Operationally, however, big-cap pharmas have been not-for-profit organizations for investors for several decades. When you see the prices get jacked up, don’t mindlessly assume it’s to line the pockets of management or investors. It is claimed rather convincingly that the per-unit cost of health care has not risen, but the volume has soared. My stump/bladder sand /aneurysm mentioned above burned through a lot of health care. Why is health care so cheap elsewhere? My son broke his foot while in Vietnam weeks ago. X-rays, an MRI, surgery with titanium pins, and casting: $1,000. Three days in the hospital: $30 per day. Being invited to stay with the surgeon’s family for two weeks to convalesce: priceless. For a total of about $1,600, my son flew to Vietnam, got excellent surgery, and flew home. That is the essence of the rapidly growing medical tourism industry. How is that possible? The doctor in Vietnam is not wealthy and probably demands few material goods. Torte reform is not needed because caveat emptor reigns. There might even be some Gates Foundation money thrown in. Most important, the profoundly expensive research and development was all done in developed countries and paid for by large revenue streams. “It’s the craziest thing in the world.” ~Bill Clinton on Obamacare Gold “I am leaving the gold equity ‘buying opportunity of a lifetime’ . . . to others; my shrunken stash of equities is it for now. Maybe I just called the bottom.” ~David Collum, 2015 Year in Review Nailed it! That was the bottom. I expect some checks in the mail from nouveau riche gold bugs who got 60% on their XAU-tracking investments. Despite weakness of late, the case for gold is now in place: European and Chinese banking risks, negative interest rates, a war on cash, and omnipresent risks of a hot war in the borderlands of the Middle East and Europe. Estimates suggest 0.3% of investors’ assets are in gold.77 Traditional portfolio theory recommends 5%, offering a better than 15-fold relative performance en route. (Recall that discussion of “flow” from above.) Let’s check in on what some of the wingnuts on the fringe of society are chortling about now: “The world’s central bankers are completely focused on debasing their currencies. If investor’s confidence in central bankers’ judgment continues to weaken, the effect on gold could be very powerful.” ~Paul Singer, Elliott Management Corp Gillian Tett: “Do you think that gold is currently a good investment? Greenspan: “Yes. Economists are good at equivocating, and, in this case, I did not equivocate.” “I can understand why holding gold would seem to be a sensible part of a national portfolio. Because there is clearly a need to take some precautions against an unknowable future.” ~Mervyn King, former head of the Bank of England “I am not selling gold.” ~Jeff Gundlach, DoubleLine and the new “Bond King” “The case for gold is not as a hedge against monetary disorder, because we have monetary disorder, but rather an investment in monetary disorder.” ~James Grant, Founder of Grant’s Interest Rate Observer “Everyone should be in gold.” ~Jose Canseco, expert on performance enhancement James Grant also went on to say that “gold is like a monetary tonsil,” leading some to speculate that his son, Charley (WSJ), slipped him a pot brownie. Let’s see if we can get the goofs too. We’ll begin by blowing out a few ideas I do not subscribe to. I keep hearing from smart guys that gold is in short supply in the Comex or Shanghai gold exchange, you name it. These stories almost never play out. I am also a huge fan of Rickards and Maloney, but the saying “gold is money” and the notion that its price is actually the movement of the value of the dollar don’t work for me: prices of everything I buy follow the dollar, not gold, on the currency timescales. On long timescales, their assertion may be correct. Someday their assertion may even be correct on short timescales, but that isn’t right now. What a year: I got as many electoral delegates as the bottom ten republican candidates combined, ate python, and own as much gold as the Central Bank of Canada. Per the Bank of Canada, it finished selling off all of its gold,78 probably to ensure that the U.S. didn’t attack. You think I jest? A WikiLeaked e-mail by Sid Blumenthal to Hillary Clinton revealed that France whacked Libya to make sure North Africa distanced itself from a gold dinar currency.79,80 Germany supposedly has half of its requested gold repatriated from the U.S. and France,81 which could be bullish or bearish on the half-full/half-empty logic. Venezuela repatriated 100 tons of gold a few years ago and was squeezed to sell it all back in the heat of a currency crisis.82 The Dutch depatriated their gold this year after repatriating it not long ago.83 The reasons are unclear. Alexei Ulyukayev, first deputy chairman of Russia’s central bank, assured us Russia will continue to buy gold (Figure 7), presumably as a defense against interventions from inside the beltway. Of course, the Fed is silent on the “metal whose name shall never be spoken.” Figure 7. Russian gold reserves. In a shockingly quiet year given how much gold moved to the upside before the post-election monkey hammering, we probably should finish with some generic goofiness. On a few occasions, gold took the beatings that are familiar—huge futures dumps in the illiquid wee hours of the morning when no price-sensitive investor would ever consider selling. It dropped $30 in seconds late on the day before Thanksgiving when nobody was paying much attention. Another hammering came from a $2.25 billion sale84 and another $1.5 billion sale,85 both of which occurred in under 1 minute. Nanex concluded that the algo “gold spoofer” was at play,86 but the 2016 poundings were transitory and toothless compared with their brethren in 2011–2015. Trouble in the ETF market was revealed when BlackRock was overwhelmed by GLD buying.87 It was forced to create more shares in February than it had in a decade. I retain previously stated convictions that GLD is a scam—fractional-reserve gold banking. Deutsche Bank was overwhelmed by requests for physical gold.88 It tried to shake the hook by demanding that such a request must be made at a participating bank.89 Deutsche Bank, the location of the request, is not a participating bank? I imagine it doesn’t have the gold, consistent with its troubles outlined below. A Swedish precious metal vault got its payment mechanism terminated without explanation.90 We can’t close without talking about gold’s kissing cousin—silver. The silver market gets its share of muggings and sustained bashings, at times spanning several weeks. The silver sellers didn’t get full traction either, however, bringing silver off a 50% gain but leaving it up 15% year to date. Silver market treachery got some attention. The London Silver Fix—truth in advertising—at times deviated markedly from the spot price,91 causing consternation among those attempting to fix the price. Deutsche Bank agreed to settle litigation over allegations it illegally conspired with Scotiabank and HSBC Holdings to fix silver prices at the expense of investors.92 A class action suit against Scotiabank suggested that the conspiracy spanned 15 years.93 JPM was cleared of silver manipulation in three lawsuits—all dismissed with prejudice, an altogether different form of “fix.”94 The only remaining question is why they are stockpiling huge stashes of physical silver.95 I’m as sanguine as ever holding large precious metal positions. Gold bugs are reminded, however, of what a big victory will feel like: “Our winnings will come . . . from the people who wake up one morning to find their savings have been devalued or bailed-in. . . . [I]t’s going to come from the pension funds of teachers and firefighters. The irony is that when gold finally pays off, it will not be a cause for celebration.” ~Brent Johnson, Santiago Capital Energy “Why Oil Prices Are About to Collapse” ~Headline from The Oil Drum in January, 2016 You could almost hear the bell ringing on that one. The price of oil promptly went on a 50% rip to the upside. Generally, however, energy was boring (to me) this year, but I keep investing in it. Of course, lower energy prices were hailed as great tax breaks for the consumer, ignoring those who say the economy drives commodity prices not vice versa. Like every other market, however, has been totally financialized. The supply/demand market got replaced with a casino-based futures market, and we know that casinos are trouble. Then there’s that whole petrodollar thingie wherein our alliances in the Middle East keep the dollar at reserve currency status and allow us to sell debt. It also seems to be the proximate cause for bombing vast numbers of Arab countries, but I’m ahead of myself. A few corporation-specific problems gurgled to the surface. Chesapeake Energy got indicted for energy market manipulation, prompting the CEO to off himself in a one-car accident.96 He probably never realized it was a self-driving car (wink). Petrobras canned 11,700 workers.97 Norway’s sovereign wealth fund started tapping principle because Statoil got crushed.98 Statoil says it will pay a dividend . . . by issuing new shares.99 Maybe it should hire more petroleum engineers and fewer financial engineers. The world’s biggest developer (SunEdison) of the world’s most expensive energy (clean energy) had accrued $12 billion in debt after a two-year asset-buying binge. Liquidation revealed a complex web of Ponzi financing.100 Here’s a funny little nugget for intellectually molesting people at cocktail parties: Edward Longshanks outlawed the burning of coal in 1306 because of pollution. Apparently, Hillary was not the first to try to put a few coal miners out of jobs. Coal is truly hated, and the industry is getting annihilated by the switch to natural gas, which is getting annihilated by fracking-based oversupply.101 The mega-miner Arch Coal got oxidized in the energy rout, ironically leaving little residue.102 It’s probably time to invest in coal miners once the market’s beta corrects. (That’s code for a market-wide sell-off.) All of my ideas are contingent on a prefacing market drop in the throes of a recession. One will come like night follows day, and then the merits of cash will be unambiguous. Energy companies getting whacked wouldn’t be so bad if it weren’t for the debt. Life insurers have huge energy-based junk bond exposure.103 Of course, the banks will allow them to hang on to greater risk by not calling in their chits rather than face reality. Zero Hedge reported that the Dallas Fed was telling banks not to push bankruptcy on energy companies.104 Denial by the Dallas Fed confirmed the story.105 (Thou doth protest too much.) Wells Fargo is committed to $72 billion if oil companies draw down their lines of credit,106 and that is just the beginning of its problems (vide infra). Wells Fargo, Bank of America, and JPM all have spiking numbers of bad energy-sector loans.107 I keep investing in energy, providing my own little Wall of Money to elevate the markets. In 20 years, I’ll know if it’s a smart move. A subset of this plan includes Russia, Iran, coal, and even uranium. Y’all can keep the new-fangled green energy; it’s too political for my tastes. “Fossil fuels have saved more lives than any progressive cause in the history of the universe.” ~Greg Gutfeld, Fox News Real Estate “7:00 PM Sinkhole forms in San Francisco 7:01 PM Thirty-five people on wait list to rent sinkhole” ~Daniel Lin (@DLin71) “House prices can’t be in a bubble because they are only 10% greater than the 2006 peak.” ~Seattle Realtor Thank God the real estate bust is over. That got outta hand fast, but we’ve learned our lesson (sigh.) Of course, it’s not over, and we learned nothing durably. Stupidity doesn’t just rhyme; it repeats. I must confess that I’m unsure how they cleaned up the ’09 bust. Where did the massive inventory go? Some did the full cycle (ashes to ashes). I suspect that many former foreclosures are rentals (Figure 8). Although single-family rentals are a lousy business and represent a dangerous shadow inventory, soaring rental rates may actually make them profitable in the medium term. The authorities also didn’t really clean up the financial mess. Fannie Mae and Freddie Mac—the two toxic government sponsored enterprises (GSEs) that nearly destroyed us in ’09—are being considered for bailouts again.108 What? Didn’t we drive wooden stakes through their hearts? No. They got placed in the government protection program under the pseudonym Karen Anne Quinlan living on Maiden Lane. Figure 8. Renter-occupied versus owned houses. Some bubbles didn’t even burst in ’09. Vancouver real estate went bonkers with the influx of Chinese money. The cost of a single-family home in Vancouver surged a record 39% to $1.2 million by midsummer. Mansions were being bought and abandoned (Figure 9). Shacks (tear downs) were selling for millions. Thomas Davidoff, erudite professor  at the University of British Columbia, noted, “These prices are getting pretty freaking nuts.” Figure 9. Abandoned $17.5 mansion,109 $7.2 million mansion for sale,110 and $2.4 million starter home in Vancouver. People were getting rich buying Vancouver houses, but I’ve seen this plot before and know the ending. With everybody on the same side of the boat (boot), it would soon be listing starboard. Is that a blow-off top in Figure 10? Not really. The authorities aggressively scuttled it with a 15% housing tax111 to “cool off the market” (real estate’s version of the ice bucket challenge.) Sales dropped 96% year over year while prices dropped 20% in the blink of an eye.112 Where’d the buyers go? Toronto!113 I suspect Vancouver will retrace a decade (or more) of gains. Figure 10. Vancouver real estate prices 1977–2016. Blue is “detached” in so many ways. Legendary real estate analyst Mark Hanson sees a few frothy domestic markets, too (Figure 11).114 Bloomberg reports that $0 down, 30-year, adjustable-rate, jumbo mortgages are being given to youngsters in Silicon Valley, all backed by stock options.115 The San Francisco Federal Credit Union calls the program POPPY, or Proud Ownership Purchase Program for You because, as Zero Hedge notes, “Steaming Pile of Shit” lacks panache.116 Alan Cohen, former Ithacan and current Florida county planner, told me the Florida real estate bubble was back and bloated. A $95 million tear down in Palm Beach was the sound of a bell ringing.117 Prices of luxury condo sales in Miami have been cut in half.118 A busting golf course bubble is causing problems in Florida and other sand states because the courses are embedded in neighborhoods.119 Smacks of time-share-like legal problems. Some may also recall that a Florida real estate bust prefaced the ’29 collapse.120 Even in New York City the market is softening, as is its bedroom community, Greenwich, CT.117 And $100 million condos are showing evidence of being overpriced.118 Whocouldanode. Aspen witnessed the largest drop—a double-black diamond “freefall”—in years.119 You want some entertainment? Check out this critique of the architectural wizardry behind the ever-popular MacMansion.120 Figure 11. Domestic real estate markets. According to Christie’s International Real Estate, $100 million homes were piling up by mid-year.121 It appears that the UK market (especially London) may finally be softening or, as they say at Bloomberg, “tanking.”122 The largest property fund had to stop redemptions.123 Ironically, they’ll have to sell assets, which I’m sure won’t help the market as the virtuous cycle turns vicious. Prime properties have also dropped in Paris, Singapore, Moscow, and Dubai.124 Some say the global high-end market has completely stalled.125 Australia seems to remain in a bubble.126 You know the picnic is over for the commercial markets when the seven-story office building in Figure 12 gets stale on the market.127 The real estate bears have taken notice. (That was inexcusable.)   Debt “Every cycle in human history has ultimately come to an end. Credit-enhanced cycles come to worse ends than the normal kind.” ~Tad Rivelle, chief investment officer of fixed income at TCW Group Federal debt has climbed 8% annually since 2000,128 but who cares because we have the reserve currency, can print the garbage at will, and are assured by the highest authorities that inflation is good and high inflation is even better. Meanwhile, friend and market maven Grant Williams has created a masterpiece of analysis of our debt problems.129 In the absence of a deflationary collapse, debt is reconciled to the downside at a geologic pace; it almost never happens. (Supposedly the Brits did it in the mid-nineteenth century.130) The problem is exacerbated by an inherently inflationary banking system that requires monotonically rising debt to survive. Where do you think the interest paid on savings comes from (when there is interest, that is)? Despite the current calm—possibly the eye of the storm—there are newsworthy events in the world of debt. The consumer is stretched by having no savings and gobs of debt—huge net debt (Figure 13). An estimated 35% of Americans have debt that is more than 180 days past due.131 They are now buying used cars with 125% loans,132 presumably to cover the negative equity from their previous loan and help pay for repairs. The used car market is priced poorly owing to the overdeveloped credit machine created to sell the trade-ins from rentals. Figure 13. Consumer debt (credit). One of the most oppressive of all debts, high-interest credit card debt, now exceeds $16,000 per household.133 The $2500 per annum interest payments are a death spiral for the average consumer earning less than $30,000 per year. The collective tab is nearing $1 trillion.134 Larry Summers blames the high debt-to-income ratio for the stagnant consumer.135 He may be missing the superimposed realization that they have no pension either (vide infra). “There’s a huge difference between having the money to buy something and being able to afford something.” ~@LifeProTips Non-dischargeable student loans continue to climb, now exceeding $1.3 trillion (Figure 14). Can anybody picture the millennials paying this off? A comprehensive White House report lays out the stark details.136 Student debt has grown linearly since ’09—suspiciously linearly. In fact, I don’t trust linearities like that: “A 45-degree angle in finance means one thing—fraud.” ~Harry Markopoulos, Madoff whistleblower I suspect that the federal government is using student loans as a monetary policy tool to methodically jam money into the system not unlike its bond-buying spree in which Andy Husar was instructed to buy $8 billion a day, every day, without fail. Curiously, the White House (metonymically speaking) thinks “student debt helps, not harms, the U.S. economy.” That idea reflects the IQ expected of a house. Figure 14. Just student loans or monetary policy? There are rumors of arrests of student debtors—Operation Anaconda.137 It sounds like Dickensian debtors’ prisons if true. I think it more likely that we are slowly heading toward some form of debt jubilee. It will be highly politicized and unfairly distributed. Hints of one come in the form of disability relief for almost 400,000 students who are said to be disabled but unable to prove it.138 If, however, ADHD or a damaged frontal cortex that allows one to spend $200,000 on an unmarketable education is a disability, 400,000 is an underestimate. Hillary publically promised to give free tuition to students while privately getting caught on a hot mic referring to the millennials’ hopes of free education as “delusional.”139 This point is now moot. “Even with borrowing costs at or near their lowest ever, companies are increasingly unable to pay their debts.” ~Mark Gilbert (@ScouseView), Bloomberg Corporate debt continues to give me fits as companies blow up their balance sheets to buy back shares and pay dividends. This is not self-extinguishing debt. You hear about corporate cash on balance sheets from the media. That cash is stored in metaphorical crocks, because the story is bogus. The top 1% of companies has 50% of the net cash on the balance sheets. (Kinda sounds like the wealth disparity pitch all over again, eh?) Apple, Microsoft, Google, Cisco, and Oracle account for 30% of it. The journalists squealing about “cash to be put to work” often fail to look at the net cash (cash minus debt). Total debt on the balance sheets doubled from $2.5 trillion in 2007 to over $5 trillion by early 2016 (Figure 15). That’s 7% per annum according to the 72 rule (interest rate x doubling time ? 72). Meanwhile the cash on the balance sheet rose by a paltry $600 billion. I get lost in the big numbers, but that is a $2 trillion rise in net debt. They’ve got to keep growing it, however, to buy back shares if they wish to prevent their share prices from collapsing. Figure 15. Corporate debt. Isn’t debt a zero-sum game? We owe it to ourselves? In a sense, yes. But when all this debt comes due, we will discover that our shiftless counterparty (us) doesn’t have any money. All that money you think you’ve saved is owed to the millions of people comprising “ourselves.” How much do we owe ourselves? Unfunded liabilities come to a total of $2 million per viable taxpayer ($200 trillion total). You know what you are owed, but do you know how much you owe to the rest of us? Got gold? Pensions “It’s existential. . . . You can pull different levers, but the decline in rates is an existential problem for the entire pension system.” ~Alasdair Macdonald, Willis Towers Watson, an actuarial consultancy Everybody passes pickles over the social security trust fund when, in fact, it doesn’t exist and never did. It is a mathematical certainty that we will default on our obligations, but it will occur in some way invisible to most people, probably via cost of living adjustments that fail to track inflation, means testing, and just printing money. I signed my wife up for social security early (62) on a bet that they would renege somehow. She didn’t earn much; I did. What started as a small payment turned miniscule. Here is her statement: Really? $411 per month was whittled down to $63 per month? The part I cut off was the final clause that said, “Don’t spend it all in one place, bitch.” The risk is in the substrata of the pension system in which bankruptcy and insolvency are smash-mouth realities. I didn’t mention state debt in the previous section because much of it is hiding as unfunded obligations to pensioners. Paying state and municipal employees with pension promises was such an easy way to compensate people without raising the money. Enter reality: public pensions are now $3 trillion in the hole.140 How long would it take to make up $3 trillion? Noooo problem! Simply pay off a million dollars a day for 8,200 years (assuming 0% interest.) Some examples are in order. Oregon’s public employee retirement system has a $21 billion unfunded liability (6 years of payouts), and it’s growing as returns of 2% somehow fall short of assumed returns of 7.7%.141 Those assumed 7–8% returns have never been accurate over the long term when adjusted for inflation, fees, and taxes. Connecticut, Kentucky, and Hawaii have similar problems.142 Illinois is the gold standard of insolvency. The Illinois Teachers Retirement System is only 40% funded and currently assumes annual returns of 7.5%.143 How did this happen? For starters, the employees are the best compensated in the Union, including free health care for life.144 Wrap your brain around that: they work for 20–30 years and get free health care for up to 50–60 more years? Meanwhile, state labor unions are asking for raises out of “fairness.” As you drill down, you find bloodbaths pretty much everywhere in municipalities. Chicago’s pensions in aggregate are 20–30% funded depending on whom you ask.145 Pending legislation, however, will allow the insolvent state of Illinois to bail out the insolvent city of Chicago.146 Isn’t there something you can do? Even if we get serious about savings among, say, the boomers, many are way past their fail-safe points. You can hear the barn door slam. At least those with defined benefit pensions are safe because they are protected by contractual obligations. Legal schmegal: there is no god-damned money! Pension cuts are just beginning but could accelerate. The Teamsters’ Central States Pension Fund is looking to cut 400,000 pensions by 55% or go flat broke—zero dollars—by 2026.147 Recent rulings preventing pension cuts are, in my opinion, the courts simply stating that it is illegal to avoid bankruptcy through selective nonpayments. Bankruptcy is about distributing remaining assets in a fair and equitable way to all creditors when there is not enough to go around. There is evidence of an old-school-style run on pensions: workers are retiring in serious numbers to remove their assets from faltering pension programs. I hear rumors of University of Illinois faculty moving to other institutions—five to Georgia Tech alone—to remove their pensions at full value from the Illinois system while it’s still possible. Dallas police and firefighters are leaving the job to grab their full pensions from a dwindling stash.148 It turns out there was also a bit of a Ponzi scheme going on, which caused the mayor to propose a 130% increase in property tax.149 I don’t see a reelection in your future, Mr. Mayor. As seasoned public servants, they might be able to move to Austin or Houston. There is now evidence the withdrawals in Dallas are being shut down.150 I could even imagine claw backs of the rolled-out funds. At the personal level, self-directed defined contribution plans paint a clockwork orange big time. Gundlach says the 40–50 crowd is “broke.” Well he exaggerated: the average American household has $2,500 saved, and the average couple consisting of two 45-year-olds has $5,000.151 Technically speaking, they are not broke, but they are totally screwed. Across all working-age families, more than 50% have no savings whatsoever,152 which is one way to render low returns moot. The 55- to 60-year-olds are positioned closer to the pearly gates but have median retirement nest eggs of $17,000.153 Assuming a couple eats six cans of dog food per day (2 × 3) and they have no other bills, the couple will run out of money in 11 years (which, on the bright side, will seem like eternity). The top 10% have less than $300K.154 The numbers could be skewed to the optimistic side: 20% of all eligible 401(k) participants have loans outstanding against their 401(k) accounts.155 This practice is so egregious that some companies are offering alternative payday loans to their employees, albeit with elevated interest rates, of course.156 I remember reading about company towns in West Virginia coal country paying their employees in company scrip. The practice was outlawed. Of course, I’ve just described a potpourri of anecdotes in the U.S. Maybe it’s better in other countries. Right off our coast we have the tropical paradise of Puerto Rico, which is so up to its ass in debt that creditors essentially own the island.157 “The ECB’s record low interest rates are causing ‘extraordinary problems’ for German banks and pensioners and risk undermining voters’ support for European integration.” ~Wolfgang Schäuble, German financial minister What about Europe? There’s where it gets fugly. The markets in pretty much everything that is bought and sold are at nosebleed valuations. There is little or no room left for gains through changes in valuation. Interest rates on bonds are miniscule, even negative (vide infra.) You won’t make anything on those bonds, but you could lose enormous principle when—not if—interest rates normalize after a 40-year downward march. There is some evidence that the reversal has now started. Equity markets also have a mean regression in their future despite what the proponents of the mathematically sophisticated Greater Fool Theory espouse. If the markets correct—they always do—you can adjust all those numbers I just cited by an arithmetically simple factor of 0.5. Could an industrial revolution save us? The most stupendous industrial revolution in history—the U.S. juggernaut in the twentieth century—returned an inflation-adjusted 4–5% including dividends using the Dow index as a proxy. Unfortunately, I do not believe those returns are corrected for management fees and taxes. I’m thinking 3% is optimistic. I’m thinking Illinois and the rest of the world are still toast. Inflation/Deflation “US deflation is largely a myth, like the Loch Ness monster or North Dakota.” ~@rudyhavenstein, undefeated Twitter Snark Champion “The debasement of coinage . . . is noticed by only a few very thoughtful people, since it does not operate all at once and at a single blow, but gradually overthrows governments, and in a hidden, insidious way. ~Copernicus The central bankers and macroeconomists all want inflation. There are media pundits who buy into this metaphysical notion that inflation is good (no offense to the metaphysicists). Dispelling the notion that this quest for inflation is just hyperbole calls for some quotes to capture pundit sentiment: “I think there is a loss of confidence in the ability of central banks in the long run to regenerate inflation.” ~Ken Rogoff, Harvard professor “Deflation . . . is bad news because it makes people less willing to borrow and spend—anticipating lower prices, consumers will put off spending—and could also lead to a fall in wages.” ~IMF economist, still waiting to buy an iPhone and flat-screen TV “All the G7 countries are suffering from a dearth of inflation.” ~Narayana Kocherlakota, former president of the Minneapolis Federal Reserve “I think they’re heading intentionally for a higher rate of inflation so that once they’ve gotten to, say, an inflation rate of 3 percent, 3.5 percent, that’s when they can jack up short-term rates.” ~Martin Feldstein, Harvard professor and former president of the National Bureau of Economic Research “Why You Should Hate Low Inflation” ~Time magazine headline “Welcome news for America’s renters could be unhelpful for the Federal Reserve. . . . Any cooling in the most pronounced driver of inflation means the Fed will have to wait even longer to reach their 2 percent price target.” ~Bloomberg “Inflation is not at our stated target, not near our stated target, and hasn’t been so in quite some time.” ~Daniel Tarullo, governor of the Federal Open Market Committee “[T]he ECB needs to signal that it is serious about pursuing its inflation mandate, including via a stepped-up pace of monthly QE purchases.” ~Robin Brooks, Goldman’s chief FX strategist “The elusive quest for higher inflation” ~Yasser Abdih, senior economist at the IMF They may believe that by generating small positive inflation levels that seem to accompany strong economic growth, they will somehow create that growth. More likely, they fear no inflation in an inherently inflationary credit-based banking system. If central bankers furiously debase their currencies with an inflationary tailwind and deflation appears nonetheless, then somebody screwed up (them). I buy this latter thesis. Of course, the measure of inflation has been debated ad nauseam in the context of stats rendered dubious by hedonic adjustments, substitutions, unvarnished fraud, and adjustments based on reading goat entrails. I discussed these frauds years ago.158 Inflation is certainly not 2% but some number much higher if one is measuring what Joe Six-pack is shelling out to exist.159 (Anticipating squeals about MIT’s Billion Price Project, I discussed it in last year’s review: I think it’s bogus.) “The grim reality is that real inflation is 7+% per year, and this reality must be hidden behind bogus official calculations of inflation, as this reality would collapse the entire status quo.” ~Charles Hugh Smith, Of Two Minds blog The fear of deflation is fear of asset deflation. With huge leverage in the system, a collapse in asset prices becomes insolvency and cardiac arrest. The problem is that the Fed’s inflation policies are the root cause of the deflationary risk. To me, the existential risk is hyperinflation, which is in full bloom in Venezuela160 and germinating in Nigeria.161 Closer to home (for Americans), rents have been soaring—13.2% per year in Boston since 2010, for example.162 Health plans are rising double digits per year, looking to jump more than 15% next year.163 College tuition is on a headline-making inflationary trajectory of 6% per annum above the rate of the admittedly dubious inflation rate. “The unproductive buildup of debt caused the Great Depression of the 1930s and the Great Recession of 2008.” ~Chetan Ahya, Morgan Stanley “If businesses and households were to resume borrowing in earnest, the US money supply could balloon to 15 times its current size, sending inflation as high as 1,500%.” ~Richard Koo, Nomura The Bond Caldera “The bond market’s 7.5% 40-year historical return is just that—history.” ~Bill Gross, Janus Sounds a little ominous. He also notes that “global yields are the lowest in 500 years of recorded history.” Alas, there are other bond doomsters. Paul Singer says “the bond market is broken . . . the biggest bubble in the world . . . never-before seen asymmetry between potential further reward and risk.” Former punk rocker and newly crowned Bond King Jeff Gundlach now moves the markets with his pronouncements. Jeff wails that the current market for 10-year treasuries is the worst opportunity in its long history. He calls it “mass psychosis . . . not guided by the markets.” With a little math wizardry that only a bond king could muster, Jeff says, “a 1% increase in the rates would result in up to $2.4 trillion of losses.”164 I’m not sure investors hiding in the safe haven of bonds are quite ready for those losses. They’re betting that rates will never rise 1%. As I type, that is proving to be wrong—possibly dead wrong.   At some point, this party has (had) to end. In 2014, James Grant of the legendary Interest Rate Observer described three bond bulls in America during the past 150 years—“1865–1900, 1920–1946, and 1981 to the present.” The first two did indeed end, and probably unexpectedly given how long they lasted and investors’ willingness to extrapolate to infinity. The third will end too. The bond market is like the Atlantic conveyor that must keep moving currents around the Atlantic Ocean.165 When the conveyor sputters, we get an ice age. When the bond market sputters, we will get the credit market analogue of an ice age. What’s different this time—a dangerous choice of words—is that the highly financialized markets are not only huge but also highly correlated. The correlation reaches way beyond the conventional debt markets into the shadow debt markets and the $1 quadrillion derivatives market—a quadrillion dollars of the most screwed-up, leveraged investments based on blind faith and confidence the world has ever witnessed. No problemo, say the optimists. We will “net” those puppies. Netting is when you round up investments on each side of the bet and simply cancel them out (like from either side of an equal sign.)166 Ya gotta wonder which genius is going to net $1 quadrillion dollars of derivatives in the midst of a raging inferno. It didn’t work in ’09, and it won’t work the next time, especially in a market so large Avogadro might wince. “They have to normalize interest rates over a period of two, three, four years, or the domestic and global economy won’t function.” ~Bill Gross How crazy has the bond market become? The French sold 50-year bonds.167 Ireland sold its first so-called century bond less than three years after it exited an international bailout program.168 Spanish 10-year interest rates are below those of the U.S., prompting James Grant to suggest “a return to the glory of Rome.” The Eurowankers (European bankers) are monetizing debt by buying corporate bonds to jam money into (1) a system that doesn’t need any more, and (2) the pockets of cronies who always demand more. Shockingly, the cronies front-ran the purchase program by buying existing corporate debt169 and creating new types of corporate debt, all for a tidy profit . . . for now. Taking a cue from the U.S. postal service, Japan is offering “forever bonds”: you get interest—a low 1% interest at that—but you never get paid back your principle.170 The idea that inflation will never rear its ugly head seems presumptuous, even preposterous. It would be safer loaning money to your adult children, who will never pay you back either. You know to the penny your return on that investment. “Bonds are still offering positive yields.” ~CNBC headline Alas, as is often the case, CNBC isn’t even right on what would be a truism in any other era. I could go on talking about ridiculously low yields, but now we get “the rest of the story.” ZIRP and NIRP “It seemed like a good idea at the time: Cut interest rates below zero to revive growth.” ~Bloomberg On April 1, 2006, an article appeared endorsing zero-coupon perpetual bonds.171 You give somebody your money, and they pay you no interest and you don’t get your money back. Irate readers forced this hooligan to “politely point out to them the date of publication” (April 1st). Did you know the word gullible is not in the dictionary? Unbeknownst to the author, the article wasn’t satire; it was foreshadowing. There is no endeavor in which men and women of enormous intellectual power have shown total disregard for higher-order reasoning than monetary policy. We are talking “early onset” something. I am not an economist, but my pinhead meter is pegging the needle. Let’s hop right over ZIRP (zero interest rate policy) because it is so 2014 and head right into NIRP (negative interest rate policy). NIRP is where you pay people to lend them money. (Check the date: it’s December, not April.) You heard that right: you give them money, and they give you back less. “The arrogant, suspender-snapping, twenty-something financial geniuses are yapping in my face. . . . I still can’t fathom ‘negative’ interest rates. It seems the ultimate insanity to say a short sale of a sovereign bond becomes a ‘risk-free’ trade.” ~Mr. Skin, anonymous guru who writes for Bill Fleckenstein Capitalism progressed for 5,000 years without interest rates ever stumbling on the negative sign (which, by the way, was invented by the Arabs more than a millennium ago). You can no longer simply say that bonds are at multi-century highs; it is mathematically impossible to bid rates on normal bonds into negative territory. It takes a special kind of monetary fascism to create negative rates. Japan is at the vanguard. Eight days after Hiruhiko Kuroda, head of the Bank of Japan (BoJ), announced he was not considering negative interest rates, he jammed rates negative.172 That was like a knuckleball from the famous pitcher Hiroki Kuroda. Nearly 80% of Japanese and German government bonds are now offering negative yields (whatever “yield” now means).173 Fifty-year Swiss debt has gone negative.174 Early this year, negative yielding global sovereign debt surpassed $10 trillion “for the first time.”175 Really? For the first time? Sovereign debt first dipped below zero only two years ago. An estimated $16 trillion (30%) of sovereign debt is now under the auspices of NIRP (Figure 17).176 Over a half-trillion dollars of corporate debt is also at negative rates.177 Reaching for yield in corporate debt markets always seemed risky, but that’s nuts. By now it could be $1 trillion. I’ve lost track. NIRP has infected the consumer debt market: Denmark and Belgium are offering negative interest rate mortgages.178 (I just soiled my thong.) By the way, you folks with big credit card debt will likely have to wait for relief; your rates are pegged above 20%. Maybe you’ll get some helicopter money. Figure 17. Negative yielding debt with a subliminal flare. These Masters of the Universe, economists and bankers extraordinaire, and their enthusiastic supporters of modern-day monetary theory certainly didn’t leap into the NIRP abyss casually. Let’s listen to the justification in their own voices. While reading, rank their comments as (1) pragmatic resignation, (2) dubious, or (3) delusional rants of the clinically insane: “If current conditions in the advanced economies remain entrenched a decade from now, helicopter drops, debt monetization, and taxation of cash may turn out to be the new QE, CE, FG, ZIRP, and NIRP. Desperate times call for desperate measures.” ~Nouriel Roubini, professor at New York University “Well, let’s face it. They can do whatever they want now.” ~Ken Rogoff, dismissing the risk of government taxation by NIRP “The degree of negative rates introduced by ECB is bigger than Japan. Technically there definitely is room for a further cut.” ~Haruhiko Kuroda, head of the Bank of Japan “It appears to us there is a lot of room for central banks to probe how low rates can go. While there are substantial constraints on policymakers, we believe it would be a mistake to underestimate their capacity to act and innovate.” ~Malcolm Barr, David Mackie, and Bruce Kasman, economists at JPM “Negative Rates Are Better at QE Than Actual QE” ~Wall Street Journal headline “Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But we consider all that, and we have to make trade-offs in economics all the time and the idea is the lower the interest rate the better it is for investors.” ~Stanley Fischer, vice chairman of the Federal Reserve, based on two years of data on NIRP “The prospect of being charged, say, 6% a year just to hold cash could unsettle people. For such a policy to work as intended, officials would have to do a lot of explaining ahead of time . . . ensuring that the public understands the central bank’s goals and supports its methods of achieving them.” ~Narayana Kocherlakota, former president of the Minneapolis Federal Reserve, bankersplaining Jedi mind tricks So these paternalistic libertarians are doing it for the children. What’s the problem? Let’s start with savings. There is no income left in fixed income. All those unresilient consumers are getting zip on what money they have. The low rates are designed to get them to spend their paltry savings. Peachy. A USA Today headline read, “How to break Americans of shortsighted saving habits.” Let’s start by giving them a return on their savings, for Pete’s sake. Giving them negative returns, however, in a twisted way is forcing them to save like their parents. Maybe I’ve misunderstood the headline. Maybe it’s excoriating the public for their growing addiction to saving, causing the wholly ludicrous and intellectually impoverished Paradox of Thrift.179 This naturally leads back to the inflation/deflation debate. The inflation that the Fed desires comes, at least in part, from inherently inflationary fractional reserve banking in which interest rates demand net dollars to increase. Negative rates, by contrast, are inherently deflationary. Every year the banking system has less. This doesn’t seem that hard to grasp. “Negative interest rates are ridiculous, particularly in a fight against deflation. They ARE deflation. . . . You are necessitating savings.” ~Jeff Gundlach, DoubleLine Low and negative rates are destroying pension management, insurance, and even banking industries. When your business model is to take in money, make decent returns, pay out a little less, and skim off the difference, then negative, zero, or even low interest rates are deadly. The model fails. This doesn’t seem hard to grasp either. “All pension plans everywhere in the world are being destroyed. Trust funds, insurance companies, endowments—they are all being destroyed.” ~Jim Rogers on NIRP and central bank policies Finally, low interest rates actually hurt the economy by keeping the weak alive, preventing the much needed creative destruction. Unviable companies on the life support of loose credit cannibalize serious businesses measurably, sometimes even fatally. You must cull the herd of the sick and weak. “Insurers have long-term liabilities and base their death benefits, and even health benefits, on earning a certain rate of interest on their premium dollars. When that rate is zero or close to it, their model is destroyed.” ~Bill Gross The big credibility problem is that I’m just a chemist “identifying” as a pundit going toe-to-toe with some serious paid-to-play central bankers and their groupies. To rectify that, let’s listen to some critics of NIRP with gravitas in their own words: “Maybe Italian banks are telling us that central bankers and their negative interest rate policies are actually destroying the Japanese and European banking system. . . . Even if they put [short-term rates] back to zero, imagine the carnage, at least in the short-term bond markets.” ~Peter Boockvar, chief strategist of the Lindsey Group “The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters, and it is impossible to predict the unintended consequences of very low interest rates, with some 30% of global government debt at negative yields, combined with quantitative easing on a massive scale.” ~Lord Jacob Rothschild, overpaid blogger “Negative interest rates are the dumbest idea ever. It’s horrible. Look at how badly it’s been working.” ~Jeff Gundlach, DoubleLine “Under a negative rate scenario, the only participant receiving more cash over time is the government. The private sector slowly collapses as we are seeing in Japan and Europe in real time.” ~Michael Green, Ice Farm Capital “If these are the first sub-zero interest rates in 5,000 years, is this not the worst economy since 3,000 BC? . . . The Bank of England is doing things today that it has never done in its history, which is 300 plus years. . . . In finance, mostly nothing is ever new. . . . However, with respect to interest rates and monetary policy, we are truly breaking new ground.” ~The James Grant Anthology “What is currently happening in various bond markets as a result of this and other interventions is simply jaw-dropping insanity. . . . What makes the situation so troubling is the fact that investors seem to be oblivious to the enormous risks they are taking. They are sitting on a powder keg.” ~Pater Tenebrarum, independent market analyst “I think what they’ve done, particularly the unconventional stuff—and there has been so much of it—has led many people into looking upon all of this as experimental policies smacking of panic.” ~William White, senior advisor at the Organisation for Economic Co-operation and Development “Negative and low interest rates around the world are crushing savers, and those policies are going to become the biggest crisis globally. We have become too dependent on central bankers.” ~Larry Fink, chairman and CEO of BlackRock “Negative interest rates in Japan is blowing my mind.” ~Jose Canseco, designated pundit What’s the end game? My best guess is that the system blows up and a lot of bankers find themselves seriously upside down . . . like Mussolini. The silent bank run is already happening. In a free market, NIRP is precluded by cash and hard assets. NIRP in Japan caused a run on safes for hoarding cash.180 A headline announced, “German Savers Lose Faith in Banks, Stash Cash at Home.”181 I was told by a high-level source that one of the world’s largest insurers was renting vaults to store physical currencies. Commerzbank was considering hoarding billions to avoid European Central Bank (ECB) charges.182 Mark Gilbert of Bloomberg notes that storing $100 million as stacks of bills would basically take a vault the size of a large closet.183 See the theme? The financial intermediaries are storing hard cash. Alas, our central banker overlords won’t stand for it. War on Cash “There is a pervasive and increasing conviction in world public opinion that high-denomination bank notes are used for criminal purposes.” ~Mario Draghi You ever notice the War on Anything never works? Whether it be drugs, terror, poverty, Christmas, hunger, you name it, it becomes an interminable, profoundly costly adventure. Now we have the War on Cash. OK, millennials, listen up. You might like paying for everything with your Swiss Army phones. There are rumors you can even swipe G-strings on pole dancers with your phones, which means you’ve totally lost the plotline. If we go to cashless, you won’t have the scratch needed to buy a cell phone before long. These globalists wish to remove your right to an important civil liberty—to hold and spend wealth outside the view of the government and beyond the control of the banks. “A global agreement to stop issuing high denomination notes would also show that the global financial groupings can stand up against ‘big money’ and for the interests of ordinary citizens.” ~Larry Summers, Harvard professor and former secretary of the treasury The global elite want to eliminate cash so that they can inflict monetary policy without restraint. As Rogoff says, cash gums up the system. When the former secretary of the treasury, Larry Summers, starts supporting the elimination of cash because it will “combat criminal activity . . . for the interests of ordinary citizens” you should sit up and pay attention. He says we “are essentially on a fairly dangerous battlefield with very little ammunition.” He is not talking about the War on Crime but rather efforts to fight the market forces attempting to curb the global banking cartel. Ex-Fedhead Kocherlakota tried to get coy using reverse psychology on free marketeers by arguing that “governments issuing cash . . . is hardly a free market.” As the story goes, the libertarians should support a cashless society by letting currencies compete in the marketplace.184 Very clever, Yankee dog! Of course, he forgot to mention that the government would then shut competitors down like they did to Bernard von NotHaus, who got his assets seized and went to prison for offering such competition. Satoshi Nakamoto, Bitcoin founder, is on the lam.185 Your arguments are specious, NK. “In principle, cutting interest rates below zero ought to stimulate consumption and investment in the same way as normal monetary policy. Unfortunately, the existence of cash gums up the works.” ~Ken Rogoff Ken Rogoff carried the standard in the War on Cash this year by hawking his new book, The Curse of Cash. He tirelessly tried to make the case for a cashless, bank-rich society, arguing that “paper currency facilitates racketeering, extortion, drug and human trafficking, the corruption of public officials not to mention terrorism.” He argues that “cash is not used in ordinary retail transactions.” Really? What do stores put in the cash registers, coupons (which are going digital)? To say he supports the termination of cash is not quite fair: he endorses using only low denominations such as $10 bills, which buy you a pack of cigarettes (maybe). Don’t spend it all in one place. On noticing that hundreds of commenters in a Wall Street Journal editorial186 showered him with suggestions on how to render him testicle free, I suggested in a brief e-mail that people are clearly stating that the idiosyncrasies of cash are a small price to pay for personal freedom. He, in turn, suggested I read his book. Not likely. There was pushback, however. Jim Grant used his sharp wit to get Ken halfway to eunuch status.187 When the globalists left Davos,188 the War on Cash seemed to accelerate almost overnight: Deutsche Bank CEO John Cryan predicted that cash won’t exist in 10 years. Norway’s biggest bank, DNB, called for an end to cash. Bloomberg published an article titled “Bring On the Cashless Future.” A Financial Times op-ed titled “The Benefits of Scrapping Cash” advocated the elimination of physical money. Harvardian and ex-Harvard president Peter Sands wrote a paper titled “Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes” in which he waxed on about fighting wars—wars on crime, drugs, and terror. Mario Draghi, head of the ECB, phased out the €500 note—30% of the physical euro notes in circulation: “We want to make changes. But rest assured that we are determined not to make seigniorage a comfort for criminals.” The New York Times called for the termination of high-denomination notes. Again, all of this was within a month of the shrimpfest at Davos. You and your banking buddies are the criminals and seem quite uncomfortable with cash. If you really care about crime, shut down HSBC: With physical cash curtailed, JPM estimates the ECB could ultimately bring interest rates as low as negative 4.5%.189 (Two decimal point precision: nice.) Phasing out the $100 bill would eliminate 78% of all U.S. currency in circulation.189 Hasbro announced that the game Monopoly will replace cash with special bank cards (special drawing rights?) in which players buy and sell with handheld devices. More recently, Prime Minister Narendra Modi of India withdrew all high-denomination bills essentially overnight.190 The results were predictable for a society in which cash really is king: the system shut down. Nearly instantaneously, India’s trucking industry—millions of trucks—were parked on the roadside: out of cash means out of gas.191 As I type, the chaos continues. There are, thankfully, influential supporters of cash. Bundesbank board member Carl-Ludwig Thiele warned that the attempt to abolish and criminalize cash is out of line with freedom.192 Bundesbank president Jens Weidmann said it would be “disastrous” if people started to believe cash would be abolished: “We don’t want someone to be able to track digitally what we buy, eat and drink, what books we read and what movies we watch.”193 Austrian economist Frank Shostak, by no means influential because Austrians are considered to be insane, reminds us that “abolishing cash to permit the central banks to lower interest rates into deeper negative territory will lead to the destruction of the market economy and promote massive economic impoverishment.”194 Maximum mirth came when Jason Cummins, chief U.S. economist and head of research at hedge fund Brevan Howard, stood up at a meeting littered with devout globalists and denounced the War on Cash and quest for inflation as stemming from the “Frankenstein lab of monetary policy.”195 Jason went on a rant: “You are not going to have independent central bankers in the next 10 years if you keep on this path. The economy has rolled over and died in an environment when financial conditions have never been easier. . . . People aren’t consuming, businesses aren’t investing, they aren’t buying houses even with a 3.5% mortgage rate. . . . The maestro culture created by Greenspan has been one of the worst features of central banking. . . . My biggest worry is that the public will conclude that . . . capitalism is just socialism for the rich.” Oops. Too late, dude. Arguments about the insecurity of cash seem specious when you look at how the digital world has fared lately. The thriving sovereign state of Bangladesh was raided for a cool $100 million by a series of unauthorized withdrawals using the global SWIFT check-clearing system.196 One could imagine that third-world safeguards against such a heist might be lax, but the hackers removed the booty from the New York Federal Reserve. A Fed spokesperson offered the official response: “Sorry. Our bad.” Apparently, the Fed has been hacked more than 50 times since 2015. Gottfried Leibbrandt, the CEO of SWIFT, has expressed grave concern about the threat hackers pose to the banking system.197 Ya think? On a more micro scale, six of my colleagues got their paychecks phished. They were tricked into signing into their financial home page. With the passwords in hand, the Nigerian princes rerouted their direct-deposited paychecks. Food stamp computers went down for over a week in June.198 An Ecuadorean bank got clipped for $12 million, blaming Wells Fargo for not plugging a leak.199 It’s probably in the Clinton Foundation. The risks of cash in society seem to pale in comparison with the risks of digits in the banking system. The termination of cash is all some dystopian futuristic abstraction that won’t come to pass, right? No. Brits are complaining that they are being stopped from withdrawing amounts ranging from £5,000 to £10,000: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.”200 The phrase, “give me my goddamned money before I jump the counter and beat the crap out of you” comes to mind. Better yet, say it’s for Zika medication and start coughing. The €500 note did indeed get abolished.201 Angela Merkel put caps on bank withdrawals. 202 I heard from a friend that Wells Fargo was obstinate about a large money transfer. (We return to Wells Fargo’s disasters in the banking section.) Some restaurants are refusing cash.203 What does “all debts public and private” mean? Nightmare scenarios in a cashless society include: (1) negative interest rates of any magnitude; (2) civil asset forfeiture (but I repeat myself); (3) bank bail-ins; (4) getting booted from or locked out of the system—by mistake or otherwise; (5) sovereigns getting booted from the SWIFT check-clearing system (just ask Pootin); (6) outlawing gold (again); and (6) hackers! We could see a black market based on S&H Green Stamps. Banks and Bankers “The unpalatable truth is that the banking model is broken. The days of generating gobs of cash from “socially useless” financial engineering . . . are over.” ~Mark Gilbert, Bloomberg “It’s the big banks that continue to prefer being highly leveraged. And too many policymakers are deferring to them. Like it or not, that means we are in line for another stomach-turning round on the global economy’s wild ride.” ~Simon Johnson, MIT professor and former IMF chief economist The banking system was not fixed in ‘09. The putrid wound was stitched up without disinfectant by a cabal of bankers and regulators, all agreeing that the system had to retain its current form. The assets of the 10 largest banks—greater than $20 trillion—grew 13% per year in the last 10 years. This is not my idea of mitigating systemic risk. Now we are near the top of an aging business cycle where bad loans start unwinding and bad ideas begin to die. Gangrene is beginning to show. Collateralized debt is picking up because the uncollateralized refuse starts piling up like during a NYC garbage strike.204 Collateralized loan obligations—the dreaded CLOs—are starting to liquidate.205 Banks are rebuilding teams for debt restructurings.206 As noted above, the Dallas Fed is attempting to extend and pretend energy loans.207 Does this kind of crackpottery ever work? Citigroup failed—as in big fat F-like failed—its stress tests.208 Those were the Kaplan practice tests. Many banks will fail when the real stress test arrives. Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, thinks we will unwind banks in an orderly process.209 Of course he does, and of course I don’t. “I don’t trust Deutsche Bank. I don’t trust what they’re saying.” ~David Stockman, former Reagan economic advisor and former Blackstone group partner Although huge problems could be triggered by a default almost anywhere in the system—an internal hedge fund or even an unusual presidential election—the disaster will be global. The first raging inferno is most likely to burn in Europe and will undoubtedly include Deutsche Bank (DB). DB was the most putrid of the ’09 wounds; it never really healed. In 2014, it was forced to raise additional capital by selling stock at a 30% discount. But why?210 This year DB sold $1.5 billion in debt at junk rates (admittedly a paltry 4.25% in this era).211 German Finance Minist

10 ноября 2015, 20:59

Бывший банкир Goldman Sachs и PIMCO вошел в ФРС США

Новым президентом Федерального резервного банка Миннеаполиса стал бывший топ-менеджер инвестбанка Goldman Sachs и фонда облигаций PIMCO Нил Кашкари.