Rigged

Trust is a fragile thing. Once lost it's hard to restore.

Brexit symbolized just that though many are still in denial and refuse to accept it. Today's FBI announcement is yet another example. And here's yet another in the short span of less than two weeks.

It's hardly a secret that global economies are in deep trouble. Many countries either are already bankrupt or are wallowing in debt that can't and will never be paid. Central banks around the globe--see, e.g., Japan for just one instance--have less credibility than a street peddler with an armful of Rolex watches.

Gold and silver prices, as you know of late, have been on a tear. Tears whether in one's pants on in markets strike fear. Often lots of it. Especially in high places. Read this about gold and you'll know just how afraid the entrenched are.

The oil patch isn't the only place rigging goes on.

.zerohedge.com/news/2016-07-05/here-they-come-again-precious-metals-traders-see-third-smackdown

Overnight

Thin volume was expected owing to the U.S. holiday and it didn't disappoint overnight Monday in Asia. With the decline in concerns about Brexit, Japanese shares rallied for the sixth straight day, its longest winning streak since November.  The Nikkei 225 was up 0.6% to 15,775.80 before falling to 15,638.52, down 0.87%. Other markets followed suit with the Kospi down 0.38%, the Hang Send off 0.64%  and the Australian ASX 200 fell nearly 1%. The Shanghai Composite traded positive 0.40% as activity in the service sector for Chinese small and medium companies move higher. The Caixin Purchasing Managers' Index (PMI) for June was at 52.7, compared with 51.2 in May, marking the fastest increase in 11 months. Levels above 50 indicate expansion.

Australia's softness stems in part over an election that might still be contested as most big banks there took a hit.The ASX 200 has a large component of financials. With the U.S. closed for holiday investors focused on Europe where stocks finished lower with FSTE 100 off  0.8%. In Europe the scaremongers were at it again as reported by CNBC.

The International Monetary Fund chief, Christine Lagarde, told a French newspaper on Monday, meanwhile, that exiting the EU could cut Britain's gross domestic product by between 1.5 and 4.5 percentage points by 2019. Additionally, ratings agency S&P Global Ratings said both the euro zone and the U.K.'s economic growth would take a knock as a result of the vote, with the agency warning that the U.K. would barely escape a "full-fledged recession caused by Brexit."

Oil traded lower with Brent at $49.75 a barrel  while U.S. futures edged down 1,22% at $48.39. Gold, considered by some the safe haven of last resort, lost some of its recent luster, trading at $1,344.16 and ounce. Japanese 10-years bonds with yields already in negative territory falling as low as -0.264
before settling at -0.237.

Overnight

Asian shares rose overnight based more on sentiment or hope than anything else since investors look for more monetary easing in the days ahead to pump up global economic growth. Monetary easing usually translated into higher equity prices.

Much of the hope focuses on Japan which has an election later in the week that though considered a minor one could take on greater impact given that Abenomic has not revived the Japanese economy and investors are restive. Hope as they say springs eternal and the U.S. is not immune where it looks as if following the Brexit saga the Fed will be forced to hold its fire on interest rates until they do what they do best, wait to read more tea leaves. Such would damped any upswing in the U.S. dollar. We like the idea of a surprise rise in agricultural commodities going forward that nearly everyone seems to be ignoring given the weaker dollar.

The Nikkei 225 was up 0.4%, the Kospi edged ahead 0.2%, the Hang Send Index gains 1.8% and the Shanghai Composite matched the Hang Send rising 1.8%. Meanwhile, much of the focus shifted to Australia where the dollar there faded early only to recover later and concerns about control over Parliament suggest a possible paralysis in policy. Reuters reported, the Australian dollar was slightly higher at $0.7495 AUD=D4, off session lows but still below Friday's one-week high of $0.7504.

The British pound edged up 0.1 percent to $1.3289 GBP=D4, nursing its losses after its 11 percent plunge to a 31-year trough of $1.3122 a week ago following last month's Brexit stunner.
The U.S. dollar took a breather ahead of the holiday, with the dollar index steady at 95.630 .DXY, but it remained pressured by a fall in U.S. Treasury yields on Friday that saw the benchmark 10-year US10YT=RR yield briefly touch a four-year nadir.
After gaining nearly 9% in June, gold rallied further overnight, up 0.5% at $1,349.20 an ounce partly on the post-Brexit news and partly over just plain uncertainty. A weaker dollar should help gold as the Fed appeared to be stalemated once again about interest rates. Silver also enjoyed a good month of June, breaking $20 an ounce for the first time in two years. Silver last traded at $20.43.


 

Chance Of Lifetime

Everyone has a worst nightmare.

For a long time many people suspected MSM polls were smelly. Now most know that's the case. Pure rotten might be a more accurate description, but today's Sunday so we'll try to be on our better behavior.  Brexit helped beyond any doubt to prove that. Last week we came across two polls after what we call the Brexit Affair that announced Hilliary ahead of Trump by double digits. Another one claimed her lead was seven points.

What many are trying to disconnect is the Brexit-Trump connection. If true--and it is--that spells trouble for the Clintonista crowd. It also scares elitists to their globalism core. Here's a story, if accurate, that will scare them even more for its worst nightmare dimensions. For years we've claimed Democrats viewed African-American voters as a monolithic block. In other words, taken for granted. It's been one of America's greatest political personal insults. The other has been the behavior of Republicans until now.

Scanning through several Trump interviews going back nearly a generation you won't find xenophobia, homophobia or racism. What you'll find is opportunity. And if you can do the damn job, you'll get the damn job. Two large segments of this nation's population, African-Americans and Hispanics, proved a long time ago they do can do the damn job. Yet they've been owned by one party.

While you're out there asking questions, MSM, somebody ought to ask one about that. And here's another one. With the exception of the status quo, who among us isn't looking for a chance of a lifetime?

zerohedge.com/news/2016-07-03/black-trump-supporter-exposes-truth-about-black-vote

Forget The Bouncing Ball

One of the popular MSM memes post-Brexit making the rounds is what The Daily Bell recently described as "voters rejected the 'expert class'--a globalist vision in other words."

This is hardly new. But those so-called self-appointed savants, usually Ivy-league pedigreed who would have you believe such, are more disingenuous than those they accuse.

There's an irony here many are missing, especially from those elitists who criticize the so-called rubes who voted to leave the EU. The globalist view is about elitism and their shrine of expert class they believe infallible and love to genuflect before. One hundred or so of them recently signed a petition scolding those who oppose GMO food sources, ordering them to stop it with this checkmate: We're scientists!

After all, isn't that what experts are all about, always being correct. The chosen possessors of superior knowledge. Magna cum BS. One of the storied heroes, though his record for many reasons turned out blotchy--to use a kinder, more gentle term--these global elitist worship is JFK.

After the disaster of the Bay of Pigs, Kennedy was well quoted for his comment summarizing the situation. This coming from a good Harvard man. It appears a lot of those rubes were listening.
Happy Fourth of July. Forget the bouncing ball. Keep your eye on your individual independence. Never be fooled by elitist crocodile tears.

 

We All Love Elections

Elections have occupied investor minds for a while now. We've all heard the Brexit news and much of the world is watching the Clinton-Trump soap opera. But there is another election coming up in a week. Though this one is reputed to be minor, it could turn out like lots of seemingly insignificant things in life to have major implications.

Japan is an aging nation. We recall reading several years ago they had only about one million 18 year olds. Not many. They are now paying young couples to have children. It's boudoir not helicopter money. It's an idea that could catch on: pay people to have safe, non-reproductive sex. But in Japan they need the young guns. The reasons are as obvious as campaigning politicians who kiss babies. So it's government subsidized sex with a kid not a dream catcher.

Pensions are important to Japan's aging population. Very important. So might be that upcoming election. Abernomics hasn't been in the eyes of many the economic cat's meow it was groomed to be. Anything but in many ways. There's an added theme here, however, bureaucratic deception, something Japanese voters know well and denizens of the EU are now learning. Hello. We all love elections.

So Abenomics is facing its voters again. Few people on earth are as cynical about their elected officials as Japanese voters. Any remaining illusions have been wrung out of them years ago. In polls, voters have explained that they have not benefited from Abenomics. Yet, Prime Minister’s Shinzo Abe’s position remains strong, mainly because the opposition is so flimsy.

Here's more from wolfstreet.com/2016/07/03/after-plowing-into-stocks-japan-government-pension-investment-fund-gpif-50-billion-loss-secret-till-after-election.

The Rest Of The Story

Here's the title to this article, Kyle Bass Shares The "Stunning" Thing A Central Banker Once Told Him. We think you'll find it quite interesting and here's the link to read, as a famous radio host used to say everyday on the air...."the rest of the story." It will tell you something about central banks and the bankers who run them.zerohedge.com/news/2016-07-01/kyle-bass-shares-stunning-thing-central-banker-once-told-him.

If you ever wanted to get a look inside the mind of Kyle Bass, founder and CIO of Hayman Capital Management, here is your chance. In a wide-ranging discussion with Grant Williams, author of Things that Make You Go Hmm and co-founder of Real Vision TV, he shared his thoughts on position-sizing, China, the appeal of holding gold, central banking, interest rates – and much, much more.
Predictably, the one topic that got the most attention was China, where as widely known Bass has made his next "career" wager, expecting a substantial devaluation of the currency, a process which had stalled out in recent months but has once again picked up speed.
Looking at recent data, and specifically something we pointed out two weeks ago, Bass said the country’s $3 trillion corporate bond market is “freezing up” amid rising defaults and canceled debt sales. “We’re starting to see the beginning of the Chinese machine literally break down.” 

Bass reiterated that China’s lending binge in recent years is unsustainable and it is only a matter of time before this bubble, bigger than the US bubble of 2005/2006 which brought Bass fame and fortune, bursts. He expects bank losses of $3 trillion to trigger a bailout, with the central bank slashing reserve requirements, cutting the deposit rate to zero and expanding its balance sheet - all of which will weigh on the yuan, and lead to a dramatic devaluation.

Healthy As It Gets

One of the lessor understood in our view causes for all the anger underlying Bexit is political leaders who say one thing then do another. It's part of the phony political saying: Politics is the art of compromise. Compromise is what got us here. A whole segment of global society is sick of it.

It's been our experience over time voters seldom vote their convictions for politicians to go to Congress or Parliament to sell them out. That's the art of compromise and thanks to things like the Internet it is becoming more and more known and unacceptable. This is hardly limited to Brexit and the U.K. It's front and center in Trump traction and that of an out and out socialist from a tiny meaningless state like Bernie Sanders.

The idea that minuscule places like Vermont, Rhode Island and such still have two representatives in the Senate and places like California, Texas, Florida and New York have the same is a joke. Besides black flies, maple syrup and Bernie Sanders, what's Vermont's contribution to those millions who lives in those other states, in some cases half a continent or an entire continent away?

Now comes talk that those UK leaders who successfully led the rebellion may not invoke Article 50 of the Lisbon Treaty. Article 50 governs the process of how to get the exit ball rolling. And make no mistake, elitists, MSM apologists for the status quo and those who love to toss around sentences like as Barron's Ben Levisohn recently did (That alone could be reason to hope saner minds prevail.) will seek to exploit the delay. The reference to "saner minds" itself is a scare tactic. It also belittles all those who voted go. It's incarnate snobbishness and you should be offended.

Just this past week EU bureaucrats as is their style delivered another slap in the face to it's so-called members, secretly cutting a deal to bail out sagging Italian banks. They have also secretly cut similar deals with France to let them slide on rules others like the weaker southern members get no such pass. France and Italy behind Germany are the EU's second and third largest economies. Big dogs get the big bones.

Voters are sick of bureaucracy and they are sick of opacity, the only two things the EU excels at. And it's becoming more than crystal clear they're growing sicker of the EU. If you love your liberty, your privacy, your sovereignty and your local control, that's about as healthy as it gets.

The Golden Clue

There's always been a lot talk about silver linings and golden this and that. Despite their repeated denials central banks have focused on policies to deter investor interest in gold for years. Yet, ironically, it turns out much of  their policies is responsible for pushing gold and silver prices higher.

In what is it's biggest rise since February gold Friday traded higher after posting an 8.8% rise in June, it's fifth weekly move up as a weaker dollar and Furher Brexit fallout capture invesot attention. The weaker dollar stems pretty much the slow growth in the U.S. economy now complicated by the prospect if the Btish central bank cutting interest rates later the summer and the Bank ig Japan doing further monetary policy easing.

Gold closed Friday 1.2% higher at $1,336.01 after hitting a session high of $1,341.40 an ounce. The upswing gold didn't escape investor attraction yor it's sister precious metal, silver, which broke through $19 an ounce foe the first time in nearly two years. The metal is up 8% this week. Though gold garners most of the attention both are seen as safe investment havens in the eyes of many investors, especially in uncertain times like these. There's another meme here we think that is mostly overlooked or arrogantly discount with all this money printing is agricultural commodity inflation.

Asking where it's going to come from at this point is the wrong question. The right question is what are the unexpecteds?  A recent example for you is the Brexit vote.

The fallout tentacles from Brexit, as is often the case with unknowns, extend further it appears than  expected. Toss in the prospect of possible further easy money policy from central banks and the fact that even putting the Fed on temporary hold is seen by some as a form of easing and the upswing in prices for gold and silver make some sense. Measured against a basket of six currencies the dollar was down 0.4% Friday. With further cental bank easing by the Bank of England, the ECB and the Bank of Japan almost a given, gold and silver prices are discounting those future events now.

Meanwhile, the Fed gets to continue the only face-saving play it has left, guess when, if you can investors, we will hike rates again?  In the interim enjoy yourselves searching for clues.

Let Price Discovery Go

 So much has been going on some of you might have missed this.

There were two things recently in the stuff we read, one of them the announcement by the Fed that all the big banks--yea, those that are too big to fail anyway--passed their phony Fed-rigged stress tests. Who but a bunch of bureaucrats could conjure up bank stress tests? What they didn't tell us is whether they used the Bruce or the Balke protocol. In this case it was probably the Yellin-Bernanke protocol or that of the heavyweight bureaucrat who's charged with roping in the banks without a lasso.

The second thing, also a gift from the Fed, was permission for these same financial behemoths to raise dividends and to do buybacks. Recall not too long ago the same Fed folks forbid Citigroup from raising its dividend because its balance sheet appeared a bit peaked-looking.

For a much of this year now we've had what MSM has described as risk-on, risk-off investing--that is, when risk is high investors tend to go to safe, lower-yielding investments and just the opposite when risk is off.  The two events mentioned above in one way is a vote of confidence of sorts, some might say bravado by the Fed, that means in this yield-starved environment if banks kick their dividends higher investors may move money into their equities to capture that yield.

Just like nearly everything else, money is competitive and, all else equal, will move to the highest return. That could mean money will move out of sovereign bonds with their next to nothing yields and move into riskier assets.Whether bank stocks are cheap is moot, but they have certainly been laggards as a sector. Central bank bond buying is believed to be over.

One could say that was one end of the teeter totter to balance out risk. Not there anymore. So a net below the flying bond market has been removed. No net for the trapeze artist is akin to those swimming in the ocean naked when the tide is up.

The Fed has been in a personal power struggle with the stock market and savers for a long, long time. The damage at this point is incalculable. Calling it interventionism is a kind term. Screwing up markets and peoples' lives is more accurate and appropriate. Fed Chair Janet Yellen and her minions would be wise to take a hint from Moses and let price discovery go.