- Apple CEO Cook Goes From Record Sales to IPhone Stumbles (BBG)
- Deal With Saudis Paved Way for Syrian Airstrikes (WSJ)
- Drone delivery: DHL 'parcelcopter' flies to German isle (Reuters)
- Tory Burch Hires Ralph Lauren Veteran as Co-CEO (WSJ)
- Apple releases iOS 8 workaround to fix dropped cell service (Reuters)
- Ukraine Probes Ex-Minister Over $3 Billion Russian Bond (BBG)
- Goldman Sachs-Led Group Near Deal to Buy Messaging Startup Perzo (WSJ)
- U.K. Seeks to Criminalize Manipulation of 7 Benchmarks (BBG)
The US economy and financial system are in worse condition than the Fed and Treasury claim and the financial media reports. Gold serves as a warning for aware people that financial and economic trouble are brewing. In the 21st century, US debt and money creation has not been matched by an increase in real goods and services. The implication of this mismatch is inflation. Without the price-rigging by the bullion banks, gold and silver would be reflecting these inflation expectations.
China is slowly moving to dominate the global gold market and it is important to join the dots regarding a few key recent developments in China relating to gold. When the International Board of the Shanghai Gold Exchange (SGE) was launched last Thursday September 18 during an evening trading session, it was notable that the first transactions were put through by a diverse group comprising HSBC, MKS (Switzerland), and the Chinese banks, ICBC, Bank of China and Bank of Communications. One encouraging factor about the SGE and the SGE international platform is that there is a lot of physical gold flowing through the Exchange. Therefore, price discovery is not just based on an inverted pyramid of mostly unallocated gold as in London or mostly cash-traded futures paper gold as in New York.
- U.S., backed by Arabs, launches first strikes on fighters in Syria (Reuters, BBG)
- But not all all back: Turkey Bars Kurds From Entering Syria to Fight Islamic State (BBG)
- Dollar Weakens on Airstrikes; Europe Stocks Drop (BBG)
- Ready for Rate Riot? Emerging Markets Set to Follow Fed (BBG)
- White House fence jumper had ammunition, machete in car, prosecutors say (WaPo)
- El-Erian "would have done things differently" (Reuters)
- Eurozone business growth slows in September, PMI survey finds (BBC)
- Shrinking Bond Desks Taken by Journeymen as Masters Fade (BBG)
- Manufacturing Rebound Relieves Growth Concerns in China (BBG)
- Former Trader Quits Playboy Club to Open Own Restaurant (BBG)
Since China fired its first 'official' shot across the Petrodollar bow a year ago, there has been an increasing groundswell of de-dollarization across the world's energy trade (despite Washington's exclamations of 'isolated' non-dollar transactors). The rise of the PetroYuan has not been far from our headlines in the last year, with China increasingly leveraging its rise as an economic power and as the most important incremental market for hydrocarbon exporters, in the Persian Gulf and the former Soviet Union, to circumscribe dollar dominance in global energy - with potentially profound ramifications for America’s strategic position. And now, as AP reports, for the first time in history, China has docked a Navy Destroyer in the Southern Iranian port of Bandar-Abbas - right across the Straits of Hormuz from 'US stronghold-for-now' Bahrain and UAE.
Given the scale of indebtedness in the UK and still very high current account deficit, the pound remains vulnerable to a currency crisis. George Soros and others may still be sizing up another opportunity to break the Bank of England. Another run on the pound has been postponed ... for now ...
- House votes to arm Syrian rebels (Reuters).... aka ISIS
- Fed Plots Cautious Course on Rate Rises (Hilsenrath)
- Scots vote in independence referendum to seal the United Kingdom's fate (Reuters)
- Yes or No, the Winner of the Referendum Is Brand Scotland (BBG)
- Draghi Loan Plan Missing Estimates Hampers ECB Stimulus (BBG) - get with the spin, it simply means "Moar QE"
- Obama Plans to Tightly Control Strikes on Syria (WSJ)
- IMF warns of risks from 'excessive' financial market bets (Reuters)
- Russia Praises Ukraine's Autonomy Law for Rebel Areas (WSJ)
China warns "the outside world doesn't get it, we do," in a statement related to the "stealth QE" they unleashed yesterday, noting investorsd "do not realize that today's Chinese economy is moving towards "new normal" in the process," and "need to accept the volatility of economic data," during this transition. Crucially, PBOC adviser Chen Yulu clarifies what Western central banks simply cannot grasp: "Hoping for stimulus policies in the face of increased economic pressure is short-sighted and does no good to long-term economic development," warning investors should not expect "strong stimulus." Wall Street is less than exuberant about the liquidity injection, as the impact on real economy may be limited due to lenders' risk aversion.
- -0.07%: Germany Secures Record Low Funding Cost at Bond Auction (WSJ)
- Pentagon Sees Possible Role for U.S. Ground Forces Against Islamic State Militants (WSJ)
- China Joins ECB in Adding Stimulus as Fed Scales Back (BBG)
- Stealthy or Normal? Analysts Diverge on PBOC’s Action (BBG)
- Sony Forecasts Massive $2B Loss as Smartphones Lag (AP)
- Islamic State campaign tests Obama's commitment to Mideast allies (Reuters)
- Brent Crude Rebounds as Libya’s Sharara Oilfield Shut (BBG)
- Market calm over Scottish vote at odds with disaster warnings (Reuters)
The Death Of The Indian and Chinese Gold Markets Has Been Greatly Exaggerated ...
It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines - the longest stretch since 2001 - and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; "paltry" considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the "recovery" rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen's news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.
The Fed consistently managed the Fed Funds rates to keep oil prices steady, even when it required mid-teens interest rates and back-to-back recessions in 1980-1982. Since US Fed Funds rates were managed to preserve US creditors’ and oil exporters’ purchasing power in oil terms, the system proved acceptable to most nations. While the Petrodollar arrangement worked well for nearly thirty years, the arrangement began to wobble beginning around 2002-04...
From copper to high-yield credit and from stocks to bonds and gold, markets are reacting violently to the headlines from China that they are unleashing another 500bn Yuan "stealth QE"... everything is rallying.. except the USD (biggest drop since May).
It has been a while since the PBOC engaged in some "targeted" QE. So clearly following the biggest drop in the Shanghai Composite in 6 months after some abysmal Chinese economic and flow data in the past several days, it's time for some more. From Bloomberg:
- CHINA’S PBOC STARTS 500B YUAN SLF TODAY, SINA.COM SAYS
- PBOC PROVIDES 500B YUAN LIQUIDITY TO CHINA’S TOP 5 BANKS: SINA
- PBOC PROVIDES 100B YUAN TO EACH BANK TODAY, TOMORROW WITH DURATION OF 3 MONTHS: SINA
Just as expected, the Chinese "derivative" currency, the AUD, goes vertical on the news, and the S&P 500 goes vertical alongside:. As for those confused what the SLF is, here is a reminder, from our February coverage of this "stealth QE" instrument.
China may need to expand its goalseek template to include the other far more important measure of Chinese economic activity, such as Industrial production, retail sales, fixed investment, and even more importantly - such key output indicators as Cement, Steel and Electricity, because based on numbers released overnight, the Q2 Chinese recovery is now history (as the credit impulse of the most recent PBOC generosity has faded, something we have discussed in the past), and the economy has ground to the biggest crawl it has experienced since the Lehman crash. What's worse, and what we predicted would happen when we observed the collapse in Chinese commodity prices ten days ago, capex, i.e. fixed investment, grew at the slowest pace in the 21st century: the number of 16.5% was the lowest since 2001, and suggests that the commodity deflation problem is only going to get worse from here.