Commodity Futures Trading Commission
Gold and silver futures surged 2.1% and 3.6% respectively and the dollar fell on the open in Asia prior to determined selling which again capped precious metal prices. Analysts and media attributed the price gains on the withdrawal of Larry Summers from the race to be the new Fed Chairman, leaving Janet Yellen as the new frontrunner.
While the only market moving event of note had nothing to do with the economy (as usual), and everything to do with the Fed's potential propensity to print even more dollars and inject even more reserves into the stock market (now that Summers the wrongly perceived "hawk" is out) some other notable events did take place in the Monday trading session. Of note: while India's August inflation soared far higher than the expected 5.7%, rising to 6.1% from 5.79% (making life for the RBI even more miserable, as it is fighting inflation on one hand, and a lack of liquidity on the other), in Europe inflation decelerated to 1.3% from 1.6% in July driven by a drop in energy prices, while core inflation was a tiny 1.1%. In a continent with record negative loan growth this is to be expected. Additionally, as also reported, Merkel appears to be positioned stronger ahead of this weekend's Federal election following stronger results for her CDU/CSU, if weaker for her broader coalition. In Libya, oil protesters said they would continue stoppages at oil terminals until their demands are met in yet another startling outcome for US foreign intervention. Finally, some headline on Syria noted a Kerry statement "will not tolerate avoidance of a Syria deal", while Lavrov observed that it may be time to "force Syria opposition to peace talks." And one quote of the day so far: "Don't want market to become excessively exuberant" from the ECB's Mersch- just modestly so?
To say that bonds are under pressure would be an understatement. Over the last few months, sentiment about fixed income has flipped dramatically: from a favored investment destination that is deemed to benefit from exceptional support from central banks, to an asset class experiencing large outflows, negative returns and reduced standing as an anchor of a well-diversified asset allocation. Similar to prior periods, history will regard the ongoing phase of dislocations in the bond market as a transitional period of adjustment triggered by changing expectations about policy, the economy and asset preferences – all of which have been significantly turbocharged by a set of temporary and ultimately reversible technical factors. By contrast, history is unlikely to record a change in the important role that fixed income plays over time in prudent asset allocations and diversified investment portfolios – in generating returns, reducing volatility and lowering the risk of severe capital loss. Understanding well what created this change is critical to how investors may think about the future.
There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!
The man who could barely recall anything at his various Congressional hearings, has no problem with remembering one key aspect of the MF Global bankruptcy: Jon Corzine is innocent! And, as a result, yesterday his lawyers filed a motion to dismiss a civil case brought against him by the CFTC in which the legal team shows that the best defense is a good offense and openly critiques the commodities regulator. DealBook excerpts from the filing: "There is no evidence demonstrating that Mr. Corzine knowingly directed unlawful conduct or acted without good faith," wrote the lawyers from Dechert, Andrew J. Levander and Benjamin E. Rosenberg. "Rather than acknowledge that reality and move on, the C.F.T.C. has clung to its baseless presumptions and manufactured charges of wrongdoing that are supposedly connected to Mr. Corzine." Right: the commingling just happened on its own. Twas but a glitch.
- Obama Holds Fire on Syria, Waits on Russia Plan (WSJ)
- China Shadow Banking Returns as Growth Rebound Adds Risk (Reuters)
- Not one but two: Greece May Need Two More Aid Packages Says ECB’s Coene (WSJ)
- BoJ insider warns of need for wage rises (FT) ... as we have been warning since November, and as has not been happening
- California city backs plan to seize negative equity mortgages (Reuters)
- Home Depot Is Accused of Shaking Down Suspected Shoplifters (BBG)
- Most-Connected Man at Deutsche Bank Favors Lightest Touch (BBG)
- Norway Pledges to Limit Oil Spending (BBG)
- China Shadow Banking Returns as Growth Rebound Adds Risk (BBG)
- Gundlach Says Fed Is Mistaken in How It's Ending Easing (BBG)
"Traditional risk controls and safeguards - that relied on human judgment and speeds - must be reevaluated in light of new markrt structures," are the initial findings from the CFTC regarding the prevalance of high-frequency trading in futures markets. As USA Today reports, efforts to reduce trading order-processing times could "lead to a competitive race to the bottom" where positions outpace risk systems and potentially lead to systemic threats. All the signals are that the top US financial regulator may impose new restrictions to halt breakdowns and to avoid high-speed trading which "could provide opportunities for information advantage." Of course, we've heard this before and with trading volumes at 15-year lows, we suspect the 'industry' will be lobbying hard; but this is a positive step (only 3 years after the CFTC started to look at HFT).
Price action in the foreign exchange market in the context of fundamental developments. Disappointing US jobs data clouds the near-term outlook for the greenback,
Peak gold has yet to be considered and analysed by the international financial and investment community but there is a risk that it has happened or will happen soon with a consequent impact on the gold mining industry and on gold prices in the 21st Century.
The US has been stockpiling helium in ‘The Federal Helium Reserve’ (no, really) – an underground reservoir near Amarillo – since it was built in 1929. There is also a processing plant and 450 miles of pipelines. The US produces about 75% of the world’s helium, with half of that stored in the aforementioned reserve. Although helium is abundant, it is not economically feasible to capture and extract it from the atmosphere. The problem is that the Congress passed ‘The Helium Privatization Act’ in 1996, which stated that the government would effectively end sales from the reservoir once its debt was paid off. And this is expected to happen in, um, early October.
First Signs of Hyperinflation Have Arrived: US National Debt Can Travel From the Earth to the Sun and Back a Stunning 83 Times!Submitted by smartknowledgeu on 08/26/2013 10:44 -0400
If one were to lay $1 bills side by side, the current US National Debt would reach from the earth to the moon 32,358 TIMES AND BACK and to the sun 93 million miles away 83 times AND BACK.
- Lew warns Congress to strike debt ceiling deal (FT)
- Central-Bank Moves Blur the View (WSJ)
- Brazil, Indonesia launch measures to shore up their currencies (FT)
- More mainstream media reminded about Fukushima - Radioactive ground water under Fukushima nears sea (AP)
- Fukushima inspectors 'careless', Japan agency says, as nuclear crisis grows (Reuters)
- New York Banker Arrested on Rape Charges in East Hampton (NYT)
- This time they mean business, for real: CFTC Moves to Rein In High-Speed Traders (WSJ)
- Britain operates secret monitoring station in Middle East (Reuters)
- Moody’s considers downgrading top US banks (FT)
- China's Bo calls wife mad after she testifies against him (Reuters)
- JPMorgan Sub-New Normal Growth Seen Vexing Next Fed Chief (BBG)
- SEC calls for cooling-off period for more staff (Reuters)
Gold traded near a two-month high after holdings in the largest ETP posted the first weekly expansion this year and markets digested the very robust global physical demand data reported last week . Demand from China and India is projected to to soar to 1,000 tonnes each in 2013 and mixed U.S. data has boosted gold’s safe haven appeal. Gold forward offered rates (GOFO), remain negative and are becoming more negative. This shows that physical demand is leading to supply issues in the highly leveraged LBMA gold market. GOFO rates are those which contributors may use to lend gold on a swap for dollars, according to the London Bullion Market Association and the negative gold interest rates show a preference to own gold over dollars by bullion banks. Negative 1, 2 and 3 month GOFO rates mean that bullion banks lent their customers, including other bullion banks, gold to obtain a positive return, thereby increasing the "paper" gold supply. Some may now may be struggling to get their gold back which may explain the significant decline in COMEX gold holdings of certain bullion banks (see commentary). This is creating significant supply demand issues in the physical gold market which should lead to higher gold prices.
- U.S. Regulator Subpoenas Banks Over Long Warehouse Queues (BBG)
- Apple Said to Prepare Holiday Refresh of IPhones to IPads (BBG)
- Fed's Yellen Says Stance on Banks Hardened (WSJ)
- Mexico opens up its energy sector (FT)
- Spin: Greek GDP marks gradual deceleration of recession (FT) ... spin aside, it dropped 4.6%, and in reality, probably over 10%
- Made-in-Canada Solution For BlackBerry Avoids Nortel Fate (BBG)
- America's Farm-Labor Pool Is Graying (WSJ)
- Video of 'lame' cattle stirs new concern over growth drugs (Reuters)
- Paulson Bid for Steinway Trumps Kohlberg Offer (WSJ)
- Egyptian government yet to decide on pro-Mursi vigils (Reuters)
- Solyndra Cola: California aims to 'bottle sunlight' in energy storage push (Reuters)
- Ackman may sues himself after all - Penney Board Assails Director William Ackman, Considered 'Rogue' After Releasing Deliberations (WSJ)
- CFTC subpoenas metals warehousing firm as inquiry heats up (Reuters)
- Obama Plan to Revamp NSA Faces Obstacles (WSJ)
- Japan growth slows in second quarter, adds to sales tax uncertainty (Reuters)
- China Urbanization to Hit Roadblocks Amid Local Opposition (BBG)
- Parents Losing Jobs a Hidden Cost to U.S. Head Start Budget Cuts (BBG)
- US seeks better access to Africa as part of trade pact review (FT)
- Singapore Cuts Trade Outlook as China Slowdown Caps Recovery (BBG)
- White House Sifts Fiscal Ideas With Band of Senators (WSJ)
- Spain may ask United Nations for support over Gibraltar (Reuters)
- Michigan Safety Net for Boomers Frays on Bankrupt Detroit (BBG)