Posts Categorized: Jim’s Mailbox

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This is very significant! Courtesy of JB.

Bill

Japanese Purchases Of US Treasurys Tumble
January 14, 2018

In the last days of 2017, we showed something surprising: as a result of suddenly exploding USDJPY funding costs, there had never been a worse time for Japanese investors, traditionally some of the most ravenous purchasers of US paper, to buy US Treasurys.

As we explained on December 27, USD funding costs for Japanese insurers and banks to invest in US Treasuries – which had surged reaching a post-financial-crisis high of 2.35% on 15 Dec – are determined by three things, namely (1) the difference in US and Japanese risk-free rates (OIS), (2) the difference in US and Japanese interbank risk premiums (Libor-OIS), and (3) basis swaps, which illustrate the imbalance in currency-hedged US and Japanese investments.

In this particular case, widening of (1) as a result of Fed rate hikes and tightening of dollar funding conditions inside the US (2) and outside the US (3) have occurred simultaneously. This is shown in the chart below.

Whatever the cause behind these sharp funding shortages, one thing was clear – dollar funding costs (FX hedging costs) for both Japanese insurers, banks and other investors to buy US Treasuries were surging (with Japanese buyers and reached a post-financial-crisis high of 2.35% on 15 Dec. And in terms of practical implications for the treasury market this means that, all else equal, marginal demand for US paper is about to plunge for one simple reason: the FX-hedged yields on US Treasurys have plunged to (negative) levels never seen before (unless of course foreign investors buy US Treasurys unhedged).

To demonstrate this point, the chart below from Deutsche Bank shows the yields on currency-hedged US Treasuries from the perspective of Japanese investors. Annualized hedge costs had risen to 2.33% at the end of December, which means that investments in 10y US Treasuries would result in virtually no yield. Furthermore, yields from investment in shorter than 10y US Treasuries would be less than JGBs and result in negative spreads

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Courtesy of CIGA David.

Jim

‘Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. This kills all objective standards and delivers men into the arbitrary power of an arbitrary setter of values.

‘Gold was an objective value, an equivalent of wealth produced. Paper is a mortgage on wealth that does not exist, backed by a gun aimed at those who are expected to produce it. Paper is a check drawn by legal looters, upon an account which is not theirs, upon the virtue of the victims.

‘Watch for the day when it bounces, marked,  ‘Account Overdrawn.’ ‘  Ayn Rand. (1905-1982).

 

This was sent in by a reader, we are passing it on.

Bill

 

Stroke has a new indicator! They say if you e.mail this to ten people, you stand a chance of saving one life. Will you send this along? Blood Clots/Stroke – They Now Have a Fourth Indicator, the Tongue

 

I will continue to forward this every time it comes around!

 

STROKE: Remember the 1st Three Letters….. S. T. R.

 

STROKE IDENTIFICATION:

 

During a BBQ, a woman stumbled and took a little fall – she assured everyone that she was fine (they offered to call paramedics) …she said she had just tripped over a brick because of her new shoes.

 

They got her cleaned up and got her a new plate of food. While she appeared a bit shaken up, Jane went about enjoying herself the rest of the evening.

 

Jane’s husband called later telling everyone that his wife had been taken to the hospital – (at 6:00 PM Jane passed away.) She had suffered a stroke at the BBQ. Had they known how to identify the signs of a stroke, perhaps Jane would be with us today. Some don’t die. They end up in a helpless, hopeless condition instead.

 

It only takes a minute to read this.

 

A neurologist says that if he can get to a stroke victim within 3 hours he can totally reverse the effects of a stroke…totally. He said the trick was getting a stroke recognized, diagnosed, and then getting the patient medically cared for within 3 hours, which is tough.

 

RECOGNIZING A STROKE

 

Thank God for the sense to remember the ‘3’ steps, STR. Read and

 

Learn!

 

Sometimes symptoms of a stroke are difficult to identify Unfortunately, the lack of awareness spells disaster. The stroke victim may suffer severe brain damage when people nearby fail to recognize the symptoms of a stroke.

 

Now doctors say a bystander can recognize a stroke by asking three simple questions:

 

S *Ask the individual to SMILE.

 

T *Ask the person to TALK and SPEAK A

 

SIMPLE SENTENCE (Coherently)

(i.e. Chicken Soup)

 

R *Ask him or her to RAISE BOTH ARMS.

 

If he or she has trouble with ANY ONE of these tasks, call emergency numberimmediately and describe the symptoms to the dispatcher.

 

New Sign of a Stroke ——– Stick out Your Tongue

 

NOTE: Another ‘sign’ of a stroke is this: Ask the person to ‘stick’ out his tongue. If the tongue is

 

‘crooked’, if it goes to one side or the other that is also an indication of a stroke.

 

A cardiologist says if everyone who gets this e-mail sends it to 10 people; you can bet that at least one life will be saved.

 

 

I have done my part. Will you?

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Jim/Bill,

Have a look at the chart for the US dollar index, it’s through the 0.91 level – expect this to worsen in the coming weeks. Hence why gold is so strong. This is just the beginning, put your safety belts on, the market will collapse before January is over.

GG

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Courtesy of JB.

Jim

Jim/Bill,

A step forward for the Yuan is a step backwards for the USD.

JB

China Central Bank Pushes For Cross-Border RMB Use
January 6, 2018

The People’s Bank of China on Friday said that it encouraged cross-border and overseas use of the renminbi (RMB) currency to settle accounts and boost investment.

It acknowledged that Chinese banks have been looking to trade in offshore RMB and that there was a growing need for foreign-funded companies in China to be able to transfer investment revenue overseas.

“Enterprises may use RMB for cross-border settlement in whatever foreign currency-based trade,” the PBOC said.

The central bank’s announcement comes part and parcel of the Beijing government’s efforts to increase foreign investment in China and facilitate ease of doing business there for domestic and foreign enterprises.

This would also work to support the extensive and increasing Chinese investments abroad.

This has led to the most prominent Chinese banks to expand their business and trade in major world currencies abroad.

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Courtesy of Garrett.

Jim

Bitcoins and Monkeys

… and EASY MONEY
It appears safe to say that the market has finally become quite easy to analyze. Let’s face it … it is so darn simple, in fact, that

hordes of people who have little to no knowledge of the market are getting it right … and many of them have been getting it right

for quite a while. Ironically, a lot of long tenured; seasoned; and knowledgeable professionals have not been getting it right …

and many of those have been missing the boat for quite some time. Maybe some of you remember that Bernard Baruch sold out

of the market in 1928. The young bucks of that day said it was too hot in the kitchen for old Bernie. Leading into 2000, just about

everyone knew that Warren Buffett was not in any technology stocks. Just like in 1929, those ‘twenty-something’ guys knew that

old Warren just wasn’t with it enough to get behind those tech stocks. Around that same time there were stories of doctors and

lawyers who were making so much money in the stock market that they dropped out of their professions in favor of the ‘easy

money’ in the stock market. Nowadays we are once again in fortunate times. It’s just too darn easy. There is no thinking required

… why waste the time in having a plan? You don’t need one. Discipline? What’s that? Just BUY! Don’t be an idiot … if you

hesitate, someone else is getting the easy money that could be yours. All the guys on the financial TV shows are telling you …

JUST BUY! The talk show hosts are telling you … your barber is telling you … the guy who fixes the cracks in your driveway knows

… the president is telling you … past presidents are telling you … dead presidents will tell you if you walk by the graveyard at

midnight. C’mon man!

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Our friend Robert checks in.

Bill

Logical move on Russia’s part especially given China’s ambitions becoming a possible reserve currency and the weakness of Europe itself.

And yes, an opportunity for both the US and Canada and one not recognized in enough time to act.

Cheers

Robert

Europe Becomes Victim of Russia’s Newest Oil Strategy
January 7, 2018

Higher shipments of Russian crude oil to China may saddle European importers with a fatter bill, an industry consultancy warned at the end of last year, noting the latest stage of Russia’s Eastern pivot: the launch of the expanded East Siberia-Pacific Ocean pipeline that would lift Urals crude supply to China twofold, to 30 million tons annually.

FGE said in a note quoted by Bloomberg that Russia will start moving more Urals eastward right after the launch of the pipeline extension, at a rate of 160,000 bpd. The overall increase of Russian crude shipments to China, according to the consultancy, could be around 200,000 bpd.

This means less oil for Europe, which is Russia’s number-one oil client. This only highlights the significance of Moscow’s Asian pivot amid lingering European sanctions following the 2014 annexation of Crimea and Russia’s involvement in separatist conflicts in the Ukraine.

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Jim/Bill,

I listened to the interview from yesterday. I’m not sure if you guys have listened to Greg Hunter interview wrap up for last week, but it is a doozy. There was one point I was interested in this last week that was not talked about. There was a 700 point plus rise in the Nikkei in one day and the next day was 200 Point Plus rise.

You both have drilled into us that the stock market moves rapidly to the upside when hyperinflation begins to set in. Did we just witness  signs of that in Japan? Things start in breadcrumbs, and I have not seen that in a very long time, if it all?

Thanks for everything,

Chuck

 

Chuck,

Such an equity market has always been a precursor to a reset.

Jim

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Jim/Bill,

This is only the beginning, in my opinion.

“This is the biggest trade deficit since January 2012.

Perhaps worse still, ex-Petroleum, this was the biggest trade deficit in US history…”

Just wait until the all the oil contracts start going through China’s gold backed Yuan, eliminating the Dollar.

I can’t imagine what will happen to the Dollar with the world no longer required to purchase Dollars to trade goods.

CIGA Wolfgang Rech

Trade Deficit Spikes To 6-Year High Despite Tumbling Dollar
January 5, 2018

Don’t show President Trump this chart…

While the equity markets are exuberant, today’s payrolls data suggests all is not awesome, and the US trade balance print is just terrible.

Despite the relative freefall in the US Dollar, the US trade deficit disappointed expectations, spiking above $50 billion.

This is the biggest trade deficit since January 2012.

Imports rose 2.5% to a record $250.7b on more inbound shipments of consumer goods and industrial supplies.

Exports climbed 2.3% to all-time high of $200.2b, led by increased shipments of automobiles, consumer merchandise and capital goods including commercial aircraft.

As Bloomberg notes, the widening trade gap could be a drag on fourth-quarter economic growth, keeping gross domestic product from advancing at least 3 percent on an annualized basis for a third straight quarter. Net exports added 0.36 percentage point to the 3.2 percent gain in third-quarter GDP.

In November, the unadjusted U.S. merchandise shortfall with China climbed to the highest since September 2015, while the gap with European Union countries was the largest in a year

Perhaps worse still, ex-Petroleum, this was the biggest trade deficit in US history…

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