Archive - Jul 2015

Yesterday, just before the Chinese market opened, precious metals but mostly gold, flash crashed in milliseconds with a violent urgency never before seen. We documented the unprecedented event last night, but for those who missed it, the following chart from Nanex clearly lays out just how sudden the "out of nowhere" selling was, which led to not one but two 20-second halts in the gold futures market spaced out precisely 30 seconds apart as a result of a Velocity Logic (or lack thereof) event.

Yesterday, the London Times reported Barclays plans to cut 30,000 jobs within two years as part of an effort to cut costs after the recent firing of CEO, Antony Jenkins. An unidentified source went on to claim that the bank has set no new targets to cut jobs beyond the 19,000 (7,000 at Barclay’s investment bank) announced in May of 2014. If implemented, however, the cuts could reduce the bank’s global workforce to below 100,000. Barclays cut 14,000 jobs last year and is expected to axe 5,000 more staffers by the end of 2016.

Many analysts believe the officially reported 1,660 tonnes to be an understatement given the enormous volumes of gold that have been passing through Hong Kong - and through Shanghai in more recent years - and the large amounts that have been produced and bought domestically.

It is important to remember that as we have long pointed out two other entities, besides the PBOC, have also been buying gold - the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).

Large caches of data stolen from online cheating site AshleyMadison.com have been posted online by an individual or group that claims to have completely compromised the company’s user databases, financial records and other proprietary information (including profiles with all the customers’ secret sexual fantasies). The hacker group "The Impact Team" manifesto concludes, "too bad for those [37 million] men, they’re cheating dirtbags and deserve no such discretion."

The nuclear industry in the United States has been at a standstill for several decades. After an extraordinary wave of construction in the 1960s and 1970s, the nuclear industry ground to a halt. Operating nuclear reactors for 80 years may be feasible, but wear and tear cannot only raise safety questions, but constant maintenance can make them economically unviable. Cracks can form in plants as they age, forcing the plant offline. The cost of repairs have already forced some power plants offline for good. The San Onofre plant in California, for example, was shut down by Southern California Edison after the bill to repair leaks ballooned. Duke Energy closed a reactor at its Crystal River power plant in Florida as repair costs got out of hand. Such incidents could be more frequent in the years ahead. But if the industry gets its way, some plants could operate well beyond their current 60-year licenses.

"While the hardcore of Podemos voters will read the outcome as an even stronger need to change the economic and political order in Europe, the more undecided voters will probably look twice at the Greek economy — held in stasis by bank holidays and capital controls — before risking voting for Podemos," Bloomberg says.

Here's what the chart looks like, and as you can see, it has thrust down to an interesting point not seen for about a decade:

Unfortunately, Trump’s antics will make it only more difficult to hold a sane debate about taking that time-out from immigration. So, one alternative is an insane debate about it, one based on sheer grievance and gall rather than the responsibilities of governance. We've feared for many years that we are all set up to welcome a red-white-and-blue, corn-pone Nazi political savior type. We don’t think Donald Trump is it. But he will be a stalking horse for a far more skillful demagogue when the time comes. There’s a fair chance that the wheels will come off the banking and monetary system well before the 2016 election. Who knows who or what will come out of the woodwork before then.

But the recovery... demand... growth... front-month WTI Crude just broke beloe $50 for the first time since April...

The Bloomberg Commodity Index tumbled once again today, hitting its lowest level since 2002. Stocks did not. We have seen this kind of 'deflationary' boom before... and it did not end well...

The power, if not necessarily the Truth, resides primarily with the bulls right now or at least it does in certain parts of the market. The NASDAQ broke out last week to new highs but the S&P 500 and even the more speculative Russell 2000 did not. The market’s advance continues to narrow, to concentrate among fewer and fewer names. Bulls will tell you that this is just a pause and the advance will broaden out. And if enough people believe that and there isn’t any convincing reason to sell, they might be right for a while. But at some point the rose colored glasses will come off and someone might wonder aloud why Celgene paid $7 billion for a company with trailing 12 month revenue of $4.5 million. Someone might wonder why Netflix is worth $48 billion and CBS is only worth $27 billion with more than twice the revenue, better margins, a higher ROE and the ability to produce positive cash flow. Until then it’s just a dream within a dream and somebody keeps hitting snooze on the alarm clock.

Even after a few weeks have passed, the unexpected visit of the Saudi Deputy Crown Prince to the St. Petersburg Economic Forum still has a lot of people scratching their heads. The news is full of widespread and contradictory theories, while questions abound. Why had the Saudis accepted an invitation from a country sanctioned by the U.S., its oldest and strongest ally? It is still a bit early for all the pieces to neatly fit together but now, after the dust has settled somewhat, a pattern seems to be emerging that may explain the situation.

Any valet confronted with the aformentioned message is, by federal statute, permitted to drop a deuce into the front trunk of the vehicle.