Posts Categorized: Jim’s Mailbox

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Courtesy of Wolfgang.

Jim

Chief Economist Loses It After Historic Rate Cut, Slams Fed In Epic Rant
July 31, 2019

The following epic rant from MUFG chief economist Chris Rupkey hardly needs any commentary, as it is about as close to a perfect reaction to the idiocy unleashed by the Poiwell Fed as can get.

Congratulations to all of you down in Washington who have lowered the boom on interest rates today. We guess you must be feeling pretty proud of yourselves. US central bank policymakers have learned nothing from the experience of low interest rates in Japan or Europe. The economies of Japan and Europe aren’t going up like a rocket ship and it is doubtful economic growth will see any greater liftoff here in the good old USA.

Go ahead and eliminate interest rates. Wall Street is already eliminating thousands of jobs in sales and trading and more rate cuts mean reduced margins and less volatility and thousands more will be told to go. Hedge interest rate risk. What interest rates?

Countries with low rates have economies with low growth. The Fed’s decision today is like in the days when doctors bled their patients to heal them. Fed officials made a very unwise decision today and buckled to the president’s demands by manufacturing reasons to cut interest rates despite a strong economy with no recession signs apparent anywhere out on the horizon.

The stock market may be partying today, but it will wake up with a huge hangover tomorrow as the Fed alters the way the country saves and spends and borrows and invests forever. I think they are probably proud of themselves, but they should really be more ashamed.

The Federal Reserve threw away their independence today and with each future rate cut they will gradually eliminate their relevance to the economy forever.

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Courtesy of JB.

Jim

UBS To Start Charging Rich Clients With Negative 0.75% Interest Rate
July 31, 2019

For years, European banks were leery of passing on the ECB’s negative -0.40% deposit rate to their clients for fears of deposit flight and other unintended consequences, in the process being forced to “eat” the difference and impacting their interest income.

However, after five years of NIRP, and with the ECB set to unleash even more negative rates in the immediate future, one bank has finally taken a stand: according to the FT, UBS plans to charge a negative interest rate on wealthy clients, those who deposit more than CHF 2 million with the largest Swiss bank.

While several, mostly smaller, banks in Switzerland and the eurozone already pass on the cost of negative official rates to corporate depositors, most large players have refrained from doing so with individual clients. But with the ECB expected to adopt a “lower for longer” stance as soon as the next central bank meeting, starting in November, UBS Switzerland will charge -0.75% a year on individual cash balances above 2 million Swiss francs, the same rate as the SNB’s rate.

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Jim /Bill,

This is a turning point.

Dave

Bretton Woods Is Dead: What Next?
July 27, 2019

French Finance Minister Bruno Le Maire has publicly admitted something normally reserved for backroom discussion in the circles of Europe’s governing elite at an event honoring the 75th anniversary of Bretton Woods (the conference which created the foundations for the post WWII world order).

At this event, Le Maire stated ever-so candidly that “the Bretton Woods order has reached its limits. Unless we are able to re-invent Bretton Woods, the New Silk Road might become the New World Order”.

He went onto state that “the pillars of that order have been the International Monetary Fund and its sister institution, the World Bank since their inception at the Bretton Woods conference in  New Hampshire in 1944.”

Were a radical transformation not undertaken immediately, then Le Maire laments “Chinese standards on state and on access to public procurements, on intellectual property could become global standards”.

The finance minister’s statements reflect the growing awareness that two opposing systems operating on two conflicting sets of principles and standards are currently in conflict, where only one can succeed. Yet as much as he appears to be aware of the forces at play between two systems, Le Maire fails miserably to identify what the Bretton Woods System was meant to accomplish in the first place, or what type of “radical transformation” is needed to save Europe from the collapse of its own speculation-ridden system.

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Yes Wolfgang, as we have said all along…it is all about credit!

Bill

Jim/Bill,

My stomach turns when I see this.

CIGA Wolfgang Rech

“Credit Card Splurge” Suggests Imminent Storm
July 25, 2019

Authored by Sven Henrich via NorthmanTrader.com,

You’d think that the drop in yields and a Fed about to cut rates would’ve brought about some relief to credit card bills. No Sir.

And you might think that the highest interest rates on credit cards ever would deter consumers from loading up on additional credit card debt. Oh no.

 

 

 

 

 

 

 

 

 

Pedal to the metal and the cumulative picture spells trouble.

Look at the data.

Here are credit card interest rates versus the Fed Funds rate:

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Jim/Bill,

If anyone believes this, I’ve got a bridge to sell them.

 

 

 

 

 

A significantly higher dollar, climbing every day, will cut the legs out from whatever profitability corporations still have.

-International firms lose big time with the repatriation of profits.

-On the domestic front, a high Dollar means foreign companies drop prices and kill our hometown corporate margins.

No way Kudlow can let the Dollar climb indefinitely.

Trump won’t allow it.

Of course, gold doesn’t give a hoot.  It still keeps climbing in the face of a stronger Dollar

It sees the light in what’s coming.

Dwindling economic activity, eventually requiring massive intervention.

CIGA Wolfgang Rech

Dollar Surges After Kudlow Says White House “Ruled Out Any Currency Intervention”
July 26, 2019

Update: Politico reports that Trump rejected Navarro’s options for devaluing the dollar, with CNBC’s Kayla Tausche reporting that Trump convened a cabinet-level trade meeting on Tuesday to discuss ideas to weaken dollar – including capital controls and active “jawboning” by officials on TV – however, the meeting broke with a decision not to intervene, and Navarro “didn’t get through 10% of his presentation,” per one official. But, as Tausche adds, “anti-interventionists worry they can’t keep Navarro and Pres. Trump at bay.”

* * *

In the past month there has been extensive speculation whether the Trump admin, as part of its desire to devalue the dollar against other currencies whose central banks are engaging in aggressive devaluation campaigns of their own, would pursue currency intervention as first Bank of America suggested last month, only to be followed by virtually every other research analyst, and culminating with a take from Standar Chartered’s Steven Englander who said that “The US Can Intervene To Weaken The Dollar… But What Would It Buy?”

To be sure there was ample reason for such speculation, not the least as a result of Trump’s own July 3 tweet in which he said that “China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA. We should MATCH…”

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Jim/Bill,

Very disconcerting!

Graham Summers gives a heads up.

CIGA Wolfgang Rech

Is This the Reason the Fed is Freaking Out?
July 24, 2019

Posted in Central Bank Insanity By The Phoenix On July 24, 2019

Just what exactly is terrifying the Fed?

Over the last week, multiple Fed officials have surfaced to suggest the Fed needs to start cutting interest rates right now.

Indeed, on Thursday, John Williams, who runs the NY Fed (the branch in charge of market operations) suggested the Fed needs to cut rates to ZERO again.

Not 2%, or 1%, ZERO.

This is happening at a time when economic data is rebounding, unemployment is below 4% and GDP growth is north of 3%.

So what exactly is going on? What does the Fed know that has it so terrified, because it’s obviously not the US economy.

1)   Deutsche Bank (DB) is imploding.

Sitting atop over $49 trillion in OCT derivatives, DB is like Lehman Brothers 2.0. And despite the best efforts of management and the authorities, the bank is imploding. DB shares were rejected by resistance last week, ending the “hope bounce” from recent moves to curtail the blow up.

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 Jim/Bill,

The public is being duped and nobody is even trying to hide it!

Read this…CAREFULLY:

“After May’s unexpected plunge, US Durable Goods Orders were expected to rebound modestly but instead, thanks to huge downward revision, Dur Goods surged 2.0% MoM… but at the weakest in 3 years on a YoY basis”

Note that Durable Goods surged ONLY because May orders had a huge downward revision!

Are the markets THAT stupid to react to this crap?

Gold drops $10 immediately on this news, despite a weaker DXY.

If people are smart, they’ll take this opportunity purchase gold…on sale.

CIGA Wolfgang Rech

Durable Goods Tumble Year-Over-Year Despite June Rebound
July 25, 2019

After May’s unexpected plunge, US Durable Goods Orders were expected to rebound modestly but instead, thanks to huge downward revision, Dur Goods surged 2.0% MoM… but at the weakest in 3 years on a YoY basis

This is the biggest MoM jump since Aug 2018…

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The noisy aircraft orders segment continue to oscillate, affected by Boeing also.

Nondefense aircraft new orders +75.5%

Defense aircraft new orders -32.1%

But we note that year-over-year, Dur Goods Orders (NSA) are down 4.5% – the weakest in 3 years…

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Jim/Bill,

The fed keeps telling us all is great.

With this morning’s headlines….

Do you feel secure?

CIGA Wolfgang Rech

New Home Sales Miss As Mortgage Rate Collapse Fails To Bring Buyers Back

New Home Sales were 646k SAAR in June – missing expectations of 658k – May new-home sales were revised down to 604,000 from 626,000; March and April purchases were also revised lower.

  • JUL 24, 2019 10:07 AM

US Manufacturing PMI Slumps To 10-Year Low

“Manufacturers are shedding workers at the fastest rate since 2009and service sector job creation is now down to its lowest since April 2017”

  • JUL 24, 2019 9:52 AM

Trade War Chaos: Trump’s Tariffs Crash American RV Industry 

“This is the worse I’ve seen it,”  …RV shipments had fallen sharply just before the last three U.S. recessions…

  • JUL 24, 2019 9:21 AM

“Cracks Are Showing”: CAT Shares Slump On Lower Earnings Guidance, Retail Sales Miss

It’s the latest sign that the blowback from the trade war might be worse than expected….

  • JUL 24, 2019 8:00 AM

Boeing Q2 Revenue Plunges, Missing By $5BN, Resulting In Shocking $1BN Cash Burn

Just like Deutsche Bank, Boeing decided that Q2 will be its kitchen sink quarter. Will it be enough?

  • JUL 24, 2019 7:58 AM

Global Stocks Slump As German Manufacturing Craters, Tech Spooked By DOJ Probe

German manufacturing slumps deeper into a recession even as global stocks continue to trade just shy of all time highs.

  • JUL 24, 2019 7:32 AM

Deutsche Bank Tumbles As Trading Revenues Plummet

“These results do little to allay market concerns on the ability to deliver on those targets”

  • JUL 24, 2019 6:57 AM

Posted by & filed under Jim's Mailbox.

Jim/Bill,

I find this absolutely hilarious.

“Gold prices slipped to a near one-week low on Tuesday as the dollar strengthened following a deal on extending debt limit in the United States.”

A stronger Dollar because government proposes we get even deeper into debt.

It’s a Bizzaro world.

The real problem is not about extending the debt limit.

It’s about where will we get the money as the world flees from our debt?

Print baby, print!

CIGA Wolfgang Rech

PRECIOUS-Gold Dips As Dollar Strengthens On U.S. Debt Deal
July 23, 2019

* ECB to meet on Thursday, Fed on July 30-31

* Spot gold may fall to $1,401-$1,409/oz range – technicals (Adds comments, updates prices)

By Karthika Suresh Namboothiri

July 23 (Reuters) – Gold prices slipped to a near one-week low on Tuesday as the dollar strengthened following a deal on extending debt limit in the United States.

President Donald Trump and U.S. congressional leaders agreed on Monday on a two-year extension of the debt limit and federal spending caps to avert a government default this year but adding to budget deficits in the world’s largest economy.

Spot gold fell 0.4% to $1,418.39 per ounce as of 1013 GMT. Prices had dropped to $1,413.80 earlier in the session, last touched on July 17.

U.S. gold futures dropped 0.6% to $1,419.

“We’re seeing a slightly stronger dollar and also news on the political front in the U.S. … created a bit of an opportunity for profit taking,” said Capital Economics analyst Ross Strachan, adding prices could soften in the near term.

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JB,

Is this because they do not have the cash to “set aside”?

Bill

Global Regulators Extend New Derivatives Rule To September 2021
July 23, 2019

LONDON (Reuters) – Global regulators have delayed by a year to September 2021 the final phase of new rules that require market participants to set aside cash or margin to cover their derivatives transactions.

Derivatives played a core role in the global financial crisis a decade ago and new rules were agreed to require all market participants to back their trades with cash in case they turn sour.

The Basel Committee of global banking regulators, and its counterpart for securities markets, IOSCO, said in a joint statement on Tuesday that progress has been made in rolling out the new margin rules for derivatives that do not pass through a clearing house.

The final so-called “Phase 5” of the rollout was due in September 2020, but many market participants said they would not be ready.

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Jim/Bill.

I thought you might like this.

Dave

Charts Suggest The Dow Index Is Being Painted To Get “New Highs” In The Market
July 12, 2019

By Pam Martens and Russ Martens

What we need today is a real life character like Vinny Gambini in the movie My Cousin Vinny to take over the questioning for the U.S. Senate Banking Committee – like Ferdinand Pecora did in the early 1930s to root out the systemic frauds in the stock market of that era. Gambini would haul the heads of equities trading for each of the major Wall Street banks and their Dark Pools to a hearing, put them under oath, and grill them about the highly suspicious trading activity that is going on in today’s markets.

Let’s start with what happened yesterday. In the face of punk earnings forecasts for the rest of this year and a growing global economic slowdown, the Dow Jones Industrial Average hit a historic milestone, closing above 27,000 for the first time. But the rising tide didn’t lift all boats: eight of the Dow’s 30 stock components closed in the red. Those stocks were Chevron, Verizon, McDonald’s, Apple, Travelers, Johnson and Johnson, Pfizer, and Merck.

There was something else that raises suspicious red flags to veteran chart watchers. A big spurt in some of the Dow stock components magically occurred in the final 15 minutes of trading, like some mystical, invisible hand had decided to levitate these share prices before the closing bell.

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Jim/Bill,

This from our friend at Shadow Stats.

Dave

The Permanent Recession
July 15, 2019

Via The Great Recession blog,

Oops. Worse than pathetic. Using consistent accounting through time, we discover we have actually been in receding GDP (recession) since 2000 with the exception of one little bump in 2004. We don’t want to admit that, so we we’ll just ignore that by saying we improved our accounting methods over time.

And that is why I say “It’s been a great recession” because we never actually left the Great Recession. Rather than the longest expansion in US history, we’ve been enduring the longest recessionin US history ever since the dot-com bust. The above chart shows the GDP growth rate, and the REAL GDP “growth” rate, which has actually been contraction, not growth, for the past two decades if measured by historic standards. So long as GDP is growing, (above 0 on the chart above), we’re in expansion. Whenever GDP is shrinking (below 0 on the chart above), we’re in recession.

So, when you see financial commentators writing or talking about “the longest expansion on record,” this month, translate that in light of this article. It is only the longest expansion on record if you change the way you calculate GDP from the way previous records were calculated. It’s sort of like saying, “This person ran the longest marathon in history,” but not mention that we’ve reduced the length of the kilometer or mile by which we measure marathons.

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Jim,

As you said years ago, countries are moving away from the dollar.

Dave

India & Russia Will Use Their National Currencies For Defense Deals To Bypass US Sanctions – Report
July 15, 2019

Russia and one of the biggest importers of its weapons, India, have decided to use their national currencies to transfer payments for massive defense deals in order to skirt possible US sanctions, according to Bloomberg.

Moscow and New Delhi have been boosting their arms trade in recent months, with Russia selling submarines, ships, tanks and jets to its Indian partners and set to supply S-400 air defense systems to the country. India’s procurement of S-400s, with a contract worth more than $5 billion, has triggered anger from one of the its largest trade partners, the US, which has warned India of possible consequences of the move.

The new payment method through the ruble and the rupee, agreed by the central banks of Russia and India, may avoid Washington’s sanctions threat. It would enable India to make the first payment for two warships built by Russia, Bloomberg said, citing sources. It is not clear what vessels were implicated in this, but last year the two parties inked a deal for four Russian guided-missile frigates for the Indian Navy, two of which are being built in Russia’s Kaliningrad region.

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Jim/Bill,

If we had only a few hundred billion in debt, I would say a little bit of inflation would certainly help whittle that down.

Higher product prices mean higher tax revenues.

Higher wage costs mean higher tax revenues.

These higher revenues for the government would help alleviate the funding pain.

But, we are approaching $23 trillion in debt, with escalating spending and budget deficits to boot!

Add to the mix:

-Global move away from the Dollar as a                 reserve currency (lower Dollar = higher inflation)

-Global move away from funding U.S. Treasury debt.                      (eventually, soaring bond yields will make funding                     our debt impossible)

-Escalating trade wars (soaring domestic consumer                     prices with huge inflationary impact)

-Oil supplies placed at risk from escalating Mideast                     turmoil and threats of tanker blockades (soaring oil                     prices, which some analysts predict could surpass                     $300 bbl, will permeate every facet of our lives                     with massive inflationary impact)

Now we’ve got a scenario whereby the word “implosion” fits the bill.

Only HYPERINFLATION can resolve this problem.

Brace yourself for eventuality.

CIGA Wolfgang Rech

Here Come The China Tariffs: Core Inflation Hotter Than Expected, Headache For Powell
July 9, 2019

Having slowed and disappointed for the last two months, all eyes are on US consumer price index growth (which was expected to slow once again in June) this morning as the next Fed rate-cut narrative confirmation.

The problem for rate-cut-hopers is that the picture is mixed at best. Headline CPI slowed to +1.6% YoY (exactly as expected) – below The Fed’s mandated 2.0% ‘stability’ level; but core CPI rose 2.1% YoY (hotter than the expected 2.0%) and above The Fed’s 2 handle…

 

 

 

 

 

 

 

 

 

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WOW James, great common sense from a Fed nominee!

Bill

Bill,

I don’t know how well a gold standard would work for a welfare state, but maybe we would have fewer “shabby little secrets” as Greenspan spoke of long ago.  Judy Shelton’s write up today gives me goosebumps. It all crescendos into a grand thesis. “Across borders and through time.” I think I understand.

http://www.gata.org/node/19226

CIGA James

 

Jim/Bill,

POTUS: “When you see the Google executives, together, and one of their executives decides to… there he is, stand up please! How good… what a great job… He’s not controversial, he’s truthful. He’s truthful. That was a great job. That was one of many.”

JB