Four Words

The pundits are at it again.

Given the debate results many are describing is a victory for Hillary, certain investments like gold, oil and the like have dropped in price while others like the dollar and the prospect for a rate hike soon from the Fed have rallied. Such a rate hike would be essentially bad for long bonds and gold and good for the dollar and such.

The smell emanating from all this is not that of victory but of opportunity. There is no victory in either of these candidates. It's simply a question of how much more of how much of the same are this nation's subjects willing to put up with. The unexpected is most likely to stick its ever-lurking head up early next year if not sooner once this travesty called an election in a semi-free country hell-bound for becoming less semi-free is over.

Four words should come to mind: You're on your own. And that's where the opportunity is. On any weakness we would be buyers of those things that are noted enemies of the status quo, like gold and energy. They desperately need  you to continue to believe and stake your future, what little choice yo actually have in determining it, in the fiat-based currency world that is now in clear disarray.

Raising interest rates by 25 or 50 basis points is being marketed as necessary to give the gaggle of global incompetent central bankers a margin of safety to lower than again in the name of liquidity should their timing be wrong. And what happens to yo if it is wrong? There is something called a track record otherwise known as a profile. It's still for now permissible to apply to many things, but just don't try to apply it at your local airport, police station or next political election.

 Systemic is a word to keep in your investing lexicon. Just today one European source declared: "European banks are in a “very fragile situation” and are “not really investable as a sector" according to Credit Suisse." A couple of days ago ECB President Mario Draghi, the EU's version of Janet Yellen, urged his buddies in Brussels to take a hard line with those villainous Brexit traitors. Hard line here is code for austerity, a ploy only they get the privilege of deciding its meaning and its use. These people love code language. It's their stock in trade.

In the current U.S. election one billionaire wag offered $10 million for anyone who could produce a copy of Trump's tax forms. Someone should tell this elitist jaw boner the money would be better spend trying to figure out the Bank of Japan or how in the hell Janet Yellen came to head up the Fed.

If you need to be hit over the head here to buy what these pundits are trying to get the world to sell to keep their empires going, that's your problem. Look into NFL helmets.

Most recognize good news. But the trick is to recognize bad news about to change. Rocked by fall in oil-and-gas prices, some energy funds are pleading with their investors for more time and money, WSJ (9-28-16)

Now about those four words. 

How Much Room Left

Ray Dalio is the founder of Bridgewater Associates, the "world's largest macro hedge fund" company with US$122 billion in assets under management," according to Wikipedia. In the news lately for announcing a big layoff at his firm of around 1,200 employees, Dalio recently raised some interesting questions about a couple of central banks, the Bank of Japan and the European Central Bank, and unlike many, answered his own questions.

One of the key themes that have emerged in the past year is that, having loaded up their balance sheets with tens of trillions in various assets, central banks are "running out of road." While it is a topic extensively discussed on these pages, going all the way back to 2014, a good summary of the practical limitations on central banks comes from the following series of charts from Deutsche Bank.

The first slide looks at the bond transmission mechanism, namely that central banks have become increasingly aware of the adverse impact of low bond yields on financial sector profitability; another aspect is that European pension liabilities as a % of market cap are at a 10-year high – and above the levels they reached in 2008, when the European market cap was at half the current level. This means that absent an independent rise in inflation expectations, central banks’ attempts to push up nominal bond yields (via less QE or faster hikes) risks leading to higher real bond yields as well; the implication is that equities tend to de-rate when real bond yields rise (i.e. the discount rate increases).


Read more: zerohedge.com/news/2016-09-27/bridgewater-calculates-how-much-time-central-banks-have-left

Overnight

A strong yen led the early morning trading overnight as the Nikkei fell 1.8%, roughly 286 points, to trade at 16,388.61 putting further pressure on Japanese exporters. The dollar/yen ratio is important ot manufacturers since many were calculating the dollar  to trade at 105 instead of below that level now for nearly two months. Banks and insurance companies also fell. Wednesday morning the dollar was at 100.470 yen.

The WSJ reported Australia’s S&P/ASX 200 was unchanged, but Korea’s Kospi was 0.4% lower. Hong Kong’s Hang Seng Index slipped 0.5%, while the Shanghai Composite declined by 0.1%. Taiwan’s markets were shut due to a typhoon. Oil prices recovered in early Asia trade, with Nymex up 27 cents at $44.94 a barrel and the international benchmark Brent higher by 34 cents at $46.31 a barrel. “Crude oil is in focus today as the U.S. API [American Petroleum Institute] will release its inventory figures and the OPEC meeting is expected to conclude,” said Alex Wijaya, a senior sales trader at CMC Markets.

Back in the U.S. the Conference Board’s consumer-confidence index rose in September to its highest level in nine years, data showed Tuesday, putting what some say is the"final domestic nail" the Fed needs to seal its case for raising interest rates. It was its highest level since August 2007, the start of the financial crisis that led to the 2007-09 recession. Meanwhile, the dollar declined 0.5% and gold pushed 1.0% lower on that bit of  news and what many are calling a Clinton debate win that hiked her poll ratings Tuesday.

A Quick Quiz

Here is a a quick quiz for you. Name a currency in 2016 that has appreciated against gold?

Don't feel bad if you can't. Take what you can from it and put it to use. We've have written extensively about central banks having shot their wad and are now impotent despite what anyone tries to tell you, especially MSM. This is not about our being correct. It's about your protecting yourself from the coming economic chaos.

The bad news is that, on present “steady-as-she goes” monthly gold accruals, it will take China and Russia — No. 6 and 7 in the world ranking of global gold reserves — about six years to draw level with the fourth- and fifth-placed countries, France and Italy.
Beijing and Moscow are building up gold stocks for a variety of reasons, ranging from unease about undue dependence on the dollar BUXX, +0.10%  — particularly acute in Russia’s case, in view of U.S.-led sanctions over the invasion of Crimea — to distaste at the low or negative returns on Europe currency holdings, especially the euro.

marketwatch.com/story/why-china-and-russia-are-buying-so-much-gold-2016-08-01.

The author left out one of the most important reasons they've been buying gold, maybe by default or maybe on purpose, to hedge against the end of the dollar as the instrument of international trade and the rise of a basket of currencies with gold in it. So now back to the quiz. Name a currency in 2016 that has appreciated against gold? Chart below from: marketslant.com.

                      

Housing Bubbles

Couple of interesting charts here to look at. What a difference, as pointed out, a year can make.

What a difference a year makes, because in the latest report by UBS wealth Management, which compiles the bank's Global Real Estate Bubble Index, it found a new champion for the title of "world's biggest housing bubble", namely a familiar name, Vancouver, but also that as many as six cities had made the "bubble" category, up from last year's two. Of last year's two "winners", London has been knocked into second place this year, and Hong Kong sixth, but both are still in bubble-risk territory.

zerohedge.com/news/2016-09-27/global-housing-bubble-biggest-these-six-cities


Looking at soaring home prices across the globe, UBS has concluded that low interest rates have now created a new global housing bubble in major cities around the world, with Vancouver and London most at risk. Not surprisingly, the Swiss bank notes that ultralow interest rates at global central banks have contributed to overheating in the housing market in recent years. 

The Big Debate

 
It was a debate that settled little other than most commentators as expected divided along their party  lines. Those who saw a Hillary advantage are hard line MSM supporters; the same holds for Trump.

One would expect the next to be much better in emphasizing their differences if anyone is going  to be actually persuaded to change their opinion. the pone wild card in all this is how voters react to Trump. He has looked this way in the past and come out stronger in follow-up pols, jus tmaybe putting the lie to all the political pundits and MSM talking heads who tend to look at what is a very nontraditional election traditionally.

Friday's VP debate might actually steal the show if  one or the other can score any points. Meanwhile, here's one summary of the big debate.

From "big, fat, ugly bubbles" to "trumped-up trickle-down" economics, tonight's debate had something for everyone. One-liners and soundbites were dropped like confetti with strange facial gestures, delicate coughs, and direct jabs flying left, right, and center. As far as the results go, it's anyone's guess: Lester Holt was soundly beaten by everyone online; the markets (S&P Futs and the Mexican Peso) both suggested a Trump loss, Trump won Twitter, online (and unscientific) polls were undecided with a slight nod to a Trump victory, as commentators were mixed, most siding with their ideological bias.

As Bloomberg reports, after a little more than 90 minutes of debate (full transcript here), here are the key takeaways from tonight's event:

The candidates spent a good deal of time on stop-and-frisk, racial issues, Obama birther matter, ISIS and nuclear weapons.

Trump appeared to be rambling on a number of questions, especially on foreign policy.

Clinton made points on the tax returns, with Trump not ending questions about whether he failed to pay any federal income taxes -- an not offering a clear reason as to why he's not releasing his tax returns.

Clinton's answers often were recitations of her campaign statements.

It was difficult for Holt, as moderator, to keep the candidates focused on the questions. At times, it appeared he'd lost control of the debate.

zerohedge.com/news/2016-09-26/debate-post-mortem-rematch-required-commentators-split-debate- winner-markets-give-hi

Overnight

They were calling it "debate dread" before the presidential election debate earlier in the U.S. Monday after the Dow shed 165 points. Now that the first debate is history and the spinmeisters are hard at labor, overnight investors get to express their reaction. We know what the spinmeisters will say.

The WSJ reported:
Declines in financial and commodities stocks sent Asian share markets broadly lower Tuesday, as markets eyed the first U.S. presidential debate for hints of future economic policy.

The Nikkei Stock Average slipped 0.4%, the S&P/ASX 200 was down 0.7%, and Korea’s Kospi was down 0.1%. Banks, insurers and other financial stocks in Japan opened lower, following a global fall in the sector overnight as concerns intensified over the health of Deutsche Bank AG , after its shares slid 7.5% Monday to their lowest in decades. At the center of concerns about Deutsche Bank, a linchpin of Europe’s financial system, is the question of whether the lender will need to raise capital to fortify its increasingly precarious finances, though the bank said Monday it was “fundamentally strong.”

As we've noted before watch the Mexican peso and according to recent reports it went up 0.7% during the first 15 minutes of the debate, meaning  investors figured Hillary was winning the debate, coming off its recent trough near 20 pesos to the dollar.
Oil got hit by some profit-taking having bounced 3 percent on Monday as the world's largest producers gathered in Algeria to discuss ways to tackle a crude glut that has battered prices for two years now.Brent crude fell 27 cents to $47.08 a barrel, while U.S. crude slipped 22 cents to $45.71. In other markets with a significant focus on energy, the FTSE Bursa Malaysia was down 0.3% and Singapore’s Strait Times Index was down 0.3%.

Gold head steady in Asian trade overnight as uncertain equity markets at the start of the first U.S. presidential debate helped the metal's safe-haven appeal. Spot gold was little changed at $1,337.10 an ounce

Worth A Thoudand Words

When Grudgingly Becomes Suddenly

The Drudge Report ran this picture of a younger Donald Trump today with the caption: "Now They Take Him Seriously."

Who is they? The big banks like Citi, JP Morgan's Jamie (It isn't too late to change your mind Brexit voters) Dimon and,of course, the biggest of the big bank villains, Goldman Sachs, one of the Fed's favorite wards.

"Take a look at me now, now that I can dance," goes the words of an old song. Well, these Wall Street boys and girls now know Trump can dance with any of them. And that raises another question. What does this mean for gold in a world dominated by phony fiat paper money, mounds upon mounds of debt and negative zero interest rates being shepherded over not by three blind mice, but Curly, Moe and Larry, aka, the ECB, the BOJ and the Fed. Gold is up 26% this year.

Here's Citi"take. It's of interest not because of its accuracy but because to give the Donald a 40 percent chance of pulling this thing off a few short months back tells you there a lot grudgingly in that 40 percent..

Gold may be in for a bumpy ride in the final quarter as Republican candidate Donald Trump now has a 40 percent chance of winning the presidential election and investors will be preparing for the possibility of higher U.S. interest rates, according to Citigroup Inc.

Volatility in bullion and foreign-exchange markets may increase, according to a commodities report from the bank as it raised the odds on a Trump victory over Democrat Hillary Clinton in November from 35 percent. There would probably be a single U.S. hike by year-end, it said. A Bloomberg Politics poll has Trump and Clinton deadlocked before a debate later today.

Bullion has rallied 26 percent in 2016, rebounding from three years of losses, as low or negative interest rates have bolstered demand. Political uncertainty has also played a part, with the U.K.’s vote to quit the European Union spurring haven demand. Forecasters including Singapore-based DBS Group Holdings Ltd. have said that the U.S. contest may buttress prices amid concern about the possible implications of a Trump presidency.

“Polls have started to tighten ahead of the U.S. presidential election, and Citi has raised the probability of a Trump victory,” the bank said in the note. “We expect a Trump win would bring out higher volatility in gold and forex, which in turn should lead to higher volumes in other precious metals.”

Gold was at $1,337.23 an ounce by 12:57 p.m. in London, with Citigroup seeing futures at $1,350 on a three-month basis and $1,270 on a six- to 12-month view. Under the bank’s base case it may be at $1,320 in the final quarter, or $1,425 under the bull case, which included the possibility of a Trump win. The Republican and Democratic nominees each get 46 percent of likely voters in a head-to-head contest in the latest Bloomberg Politics national poll, while Trump has 43 percent to Clinton’s 41 percent when third-party candidates are included.

Trump has proven to be a resilient if unconventional candidate, courting controversy with blunt remarks throughout his run for the White House to see off a crowded Republican field of contenders and face the former secretary of state. Among policy proposals, he’s attacked U.S. trade policy and threatened to build a wall along the border with Mexico.



As we pointed out before about Citi"s 40 percent chance of a Trump victory, there's a lot of grudgingly in those gold numbers. 

bloomberg.com/news/articles/2016-09-25/citi-says-gold-may-be-volatile-raises-odds-on-trump-win-to-40

Watch The Peso

We have as have others written about this before, the predictive power of the Mexican peso and the outcome of this very contentious presidential election. Track the peso's reaction to tonight's debate. It could swing wildly in one direction or another based on who the forces that be can convince the people who the winner was.

Spinners will be burning the midnight oil. Some of the most egregious spinners will be CNN, Bloomberg, MSNBC,  Fox, the NY Times, the LA Times, the Washington Post and Barbara Streisand

The battered Mexican peso has tumbled to historic new lows in recent days, nearing a psychological barrier of 20 pesos to the U.S. dollar and causing anxiety on the streets, at businesses and in the halls of government. 

Among other factors, many point to the recent rise in U.S. presidential polls of Donald Trump, the Republican nominee who has vowed to build a wall along the U.S.-Mexico border and has been widely accused here of Mexico-bashing.  

“There is a very clear relation with the [U.S.] electoral process,” Mexican President Enrique Peña Nieto told Radio Formula last week, linking Trump’s improved standings in the polls to the peso’s doldrums.

The Mexican currency plunged to a record low of about 19.90 to the dollar last week and has hovered near 20 to the dollar for days. Exchange houses are already posting signs offering a 20-peso exchange rate, a jarring sight for many here.

Despite official declarations downplaying the devaluation, some analysts are warning that things could get worse and assailing what they call government inaction.

“It appears that the authorities in charge of the politics, economics and finances of the country are flummoxed, paralyzed by the magnitude of the devaluation,” wrote columnist Enrique Galvan Ochoa in Mexico’s La Jornada newspaper.  “And the effects of the phenomenon could extend to the large companies of the private sector, deeply indebted in dollars.”
latimes.com/world/mexico-americas/la-fg-mexico-peso-20160924-snap-story.