Up Next——Deflation In The Canyons Of Wall Street

Record high stock and bond prices are flashing danger signs to former Reagan White House Budget Director David Stockman. Stockman contends, ‘I don’t think we are going to have a liquidity crisis. I think it’s going to be a value reset. I think there is going to be a jarring downward price adjustment both in the stock market and in the bond market. This phantom or phony wealth that has been created since the last crisis is going to basically evaporate.’
So, what asset is safe? Stockman says gold and goes onto explain, ‘I think the time to buy (gold and silver) is ideal. Gold is the ultimate and only real money. Gold is the only safe asset when push comes to shove. They tell you to buy the government bond, that’s a safe asset. It’s not a safe asset at its current price. I am not saying the federal government is going to default in the next two or three years. I am saying the yield on a 10-year bond of 2.4% is way below of where it’s going to end up. So, the only safe asset left is gold. This crazy Bitcoin mania has drained off what would otherwise be a demand for gold. . . . When Bitcoin collapses, spectacularly, which it will because it’s sheer mania in the markets right now. When it collapses, I think a lot of that demand will come back into gold, as well as people fleeing the standard stock and bond markets for the first time in 9 or 10 years.’

This post was published at David Stockmans Contra Corner on December 27th, 2017.

Litecoin Founder Cashes Out, Sells Entire Stake After 9,300% Rally

Charlie Lee, the creator of the world’s fifth-biggest cryptocurrency, Litecoin, announced shortly after midnight that he was cashing in his profits after a torrid, 9,300% rally in the past 12 months. In a post on reddit, the San Francisco-based software engineer who founded litecoin in 2013, said that he sold and donated all of his holdings over the past few days.
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“Litecoin has been very good for me financially, so I am well off enough that I no longer need to tie my financial success to Litecoin’s success. For the first time in 6+ years, I no longer own a single LTC that’s not stored in a physical Litecoin” Lee said in the post.
Lee explained that his liquidation was aimed at preventing a ‘conflict of interest’ when the creator of what is known as “Bitcoin Silver” makes comments on twitter about the digital currency – something he tends to do with chronic zeal – that could influence its price, he said. That said, Lee declined to comment in the post on how many coins he sold or at what price, and asked readers to please “don’t ask me how many coins I sold or at what price. I can tell you that the amount of coins was a small percentage of GDAX’s daily volume and it did not crash the market.”

This post was published at Zero Hedge on Dec 20, 2017.

“We Have Done Nothing Improper” – Omega’s Cooperman Responds To Insider Trading Charge: Full Letter

As reported earlier today, in a stunning crackdown on one of the hedge fund industry’s icons, the SEC accused Omega Advisors’ Leon Cooperman of insider trading in shares of Atlas Pipeline. As expected, Cooperman disagrees, and in a 5 page letter to investors, he explains why “we are highly disappointed with the Commission’s decision to file charges, and we strongly disagree with the Commission that either the firm or I have engaged in any unlawful conduct.”
We have done nothing improper and categorically deny the Commission’s allegations. As I wrote last year when we first received the subpoenas, I have throughout my fifty-year career in the securities business firmly believed in detailed, fundamental research. As I explained then, that approach has long contemplated direct, face-to-face interactions with company management. Such exchanges of information with company management are appropriate, well-established in the industry, and even necessary. As a Wall Street Journal op-ed put it just last year, ‘information is not a crime.’ Although we don’t think it would be productive to state here our views on what we believe to be a seriously misguided effort by the authorities in these matters, we would refer anyone who is interested to Three Felonies a Day: How the Feds Target the Innocent by Harvey A. Silverglate and Licensed to Lie: Exposing Corruption in the Department of Justice by Sidney Powell, both of which provide fascinating insights into the machinations of our country’s criminal justice system. This is how Cooperman justifies his internal communications with management:

This post was published at Zero Hedge on Sep 21, 2016.

China QE Dwarfs Japan And EU

Crescat Capital letter to investors for the second quarter ended June 30, 2016
See more great hedge fund letters here – also Crescat’s whole letter is great as always but the stat on China in the headline is mind-boggling – check it all below.
Dear Investors,
The markets have been turbulent in the wake of the unexpected Brexit vote. Crescat’s hedge funds were well prepared for the shock based on our diversified global macro themes, well hedged long/short positioning, and disciplined risk model. As evidence, our Global Macro Fund posted gains on both Friday and Monday when the S&P 500 was down 3.6% and 1.8% respectively. Crescat Large Cap, our long-only strategy, was also well prepared for Brexit with its large cash position, precious metals exposure, and ample defensive equity holdings. Even after the sharp snap back rally on Tuesday and Wednesday, all three Crescat Strategies are ahead of the S&P 500 in June month to date through yesterday’s close with the S&P 500 down 1.1%.
Far and away, our best performing macro theme year to date remains Global Fiat Currency Debasement, our long precious metals theme across all three strategies. Gold, the world’s perennial reserve currency, remains near a historically low valuation relative to the global fiat monetary base. Meanwhile, silver remains near a historically low valuation relative to gold. The problems caused by debt-to-GDP excess in Europe, China, Japan, and elsewhere auger well for further global central bank fiat money debasement and substantial future hard money, i.e., gold and silver, appreciation. Brexit is just one of the catalysts.
Despite a broadly rallying market in April and May, we also saw positive returns in the hedge fund strategies from our short-oriented China Currency and Credit bubble theme. We believe that this theme, along with our New Oil and Gas Resources and Asian Contagion themes represent significant opportunities for the second half of 2016. In addition, our Yahoo/Alibaba Spread trade has continued to be a low volatility and high return winner for the hedge fund strategies. We think this has much further to play out in our favor as we show below.

This post was published at David Stockmans Contra Corner on July 1, 2016.

Wall Street Hockey Sticks – – Correcting Sharply Downward Yet Again

EPS estimates are always in the practice of falling over time, so that natural process should be considered when comparing across the movement of the calendar. That said, however, earnings continue to defy projections of a rebound. This is not to say that analysts aren’t expecting one, only that the expectation keeps pushing further out in time.
According to Howard Silverblatt’s figures from Standard & Poor’s, as late as November analysts were projecting $27.71 in quarterly earnings (as reported) for Q4 2015 and $27.60 for Q1 2016. Those represented significant year-over-year gains ( 21% and 27%, respectively) from the weakness that ended 2014 and began 2015, all figured to be transitory. With 98% of the 500 companies having reported their first quarter 2016 results now, those November expectations were entirely upended.
EPS in Q4 was only $18.70, a third less than anticipated while the quarter was in progress. First quarter EPS will settle somewhere close to its current number of $21.72, a fifth less than what was hoped just over six months ago.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ June 22, 2016.

More HillbamaCare Shock: Premiums Up 18-27%, Deductibles Soaring

Reports continue to flow in of big ObamaCare premium spikes that will hit exchanges around the country in 2017.
Insurers are seeking an average 27% rate hike in Oregon; 21% in Maine; 18% in Virginia; and 18% in Florida.
But if the premiums don’t shock you, the deductibles very well might. Not only are bronze deductibles rising as high as $7,150 in 2017, from a maximum of $6,850 this year, but silver deductibles of $6,000 or more are becoming commonplace. In fact, Centene (CNC), one of the most aggressive exchange competitors when it comes to pricing, is planning to roll out a new silver plan with a $7,050 deductible next year under the Ambetter name – to go along with the $6,500-deductible silver plan it’s already offering. Amazingly, Ambetter had just a $1,750 silver-plan deductible in 2014.

This post was published at David Stockmans Contra Corner on May 16, 2016.

How The Money Printers Enable Big Government

Sound money advocates are often hit with the charge of being ‘doom and gloomers.’ Yes, we do warn that unsound monetary policies enable unsustainable fiscal commitments, which will lead eventually to a currency crisis.
Sound money advocates are also often portrayed as party-poopers. Yes, we do seek to take away the bottomless punch bowl of easy money and replace it with something more solid. However, we are not pessimists or killjoys by nature.
To the contrary, we are quite optimistic about the ability of genuinely free markets to generate ever greater levels of prosperity for ever greater numbers of people. To advocate hard money, as in a gold and/or silver standard, is simply to be a hard-nosed realist about the dangers of giving governments the power to issue unbacked fiat currencies.
The case for hard money is based on the proposition that real wealth is generated by productive activity in the real economy. When governments and central banks assume the power to set interest rates artificially low, to expand the supply of money and credit at will, and to bail out ‘too big to fail’ financial institutions, they are engaging in massive wealth transfers. They are stealing purchasing power away from productive workers in the real economy and transferring it to bankers and bureaucrats.
As the late economist and Nobel Laureate Friedrich A. Hayek noted, ‘With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.’

This post was published at David Stockmans Contra Corner on April 21, 2016.

When Wall Street Made A Country – -The Rise Of Panama

This goes back a long way. The Panamanian state was originally created to function on behalf of the rich and self-seeking of this world – or rather their antecedents in America – when the 20th century was barely born.
Panama was created by the United States for purely selfish commercial reasons, right on that historical hinge between the imminent demise of Britain as the great global empire, and the rise of the new American imperium.
The writer Ken Silverstein put it with estimable simplicity in an article for Vice magazine two years ago: ‘In 1903, the administration of Theodore Roosevelt created the country after bullying Colombia into handing over what was then the province of Panama. Roosevelt acted at the behest of various banking groups, among them JP Morgan & Co, which was appointed as the country’s ‘fiscal agent’ in charge of managing $10m in aid that the US had rushed down to the new nation.’
The reason, of course, was to gain access to, and control of, the canal across the Panamanian isthmus that would open in 1914 to connect the world’s two great oceans, and the commerce that sailed them.

This post was published at David Stockmans Contra Corner on April 11, 2016.

Now We Know Why the ECB Panicked

The only immediate silver lining may be in the end the most fruitful of long-term prospects. Central bankers have done us a profound favor by overplaying their hand time and again. The catalog of false statements and expectations is long and getting longer. The ECB then assured ‘us’ that this was different and that the LTRO’s, massive as they were, did not work because they weren’t QE. Seeing it described then in countless articles and interviews as something like magic, the speed with which it has unraveled leaves little doubt.
Still less than a year later, it is comical to see what a fuss was made back then when the ECB did nothing more than switch the method. To some economists, there might be a practical distinction between the LTRO’s and the technically named PSPP, but in the end those don’t matter because the true purpose is not now nor has it ever been about how any central bank will interfere, rather the intent is whether that interference further transmits into productive economic catalysts. Who really cares that Portugal’s borrowing costs are record lows if youth unemployment in Portugal is still 30% and general economic prospects are no different than they were four and five years ago? The byproducts of both the LTRO’s and QE has been inert, useless bank reserves whose only real effects have been to completely obliterate the function of ‘money’ markets. The real economy remains undisturbed, unimpressed and still hugely underperforming.
To review the commentary about QE last year in light of today’s events is still, however, enlightening. On March 5, 2015, for example, Mario Draghi was already claiming that QE had worked even though he had to yet purchase a single bond under its gaping auspices.

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ March 10, 2016.

The G-20s Big Fat Zero – – Now Comes The Bubble’s Demise!

The tens of millions of taxpayer money wasted at the G-20′s Shanghai soire had a silver lining. The assembled masters of world finance came up with a big fat zero on the coordinated global stimulus front.
So doing, they essentially admitted that their money printing central banks are out of dry powder (‘…but monetary policy alone cannot lead to balanced growth’) and that they are divided and confused on the fiscal front.
Indeed, the best result of the weekend is that the gaggle of G-20 statists acquiesced to Germany’s absolute ‘nein’ on the foolish notion that a world self-evidently drowning in debt can still borrow its way back to prosperity. With respect to that ragged Keynesian shibboleth, Germany’s intrepid finance minister left nothing to the imagination:
Germany had made it clear it was not keen on new stimulus, with Finance Minister Wolfgang Schaeuble saying on Friday the debt-financed growth model had reached its limits.
‘It is even causing new problems, raising debt, causing bubbles and excessive risk taking, zombifying the economy,’ he said…….’Fiscal as well as monetary policy has reached their limit.’
So this is not about a failed G-20 meeting; its about the end of a vast, long-running policy scam conducted by global officialdom and their central bankers. In a word, they did not save the world in 2008-2009 with the ‘courage’ of extraordinary policies. They just temporarily buried the symptoms by resort to crank monetary theories and fiscal snake oil.

This post was published at David Stockmans Contra Corner by David Stockman ‘ February 29, 2016.

Silver Linings: Keynesian Central Banking Is Heading For A Massive Repudiation

For several years now the small coterie of Keynesian academics and apparatchiks who have seized nearly absolute financial power through the Fed’s printing presses have justified the lunacy of unending ZIRP and massive QE on the grounds that there is too little inflation. The bureaucrats at the IMF even invented a lame-brained catch-phrase, calling the purported scourge of money which retains most of its value ‘lowflation’.
This whole consumer inflation targeting gambit, of course, is an inherently preposterous notion because there is not a scrap of evidence that 2% consumer inflation is better for rising living standards and societal wealth gains than is 0.2%. And there is much history and economic logic that points in exactly the opposite direction.
Between 1870 and 1913 in the United States, for example, real national income grew at 3.5% per year – – the highest gain for any 43 year period in history. Yet the average inflation rate during that long period of capitalist prosperity was less than 0.0%. That was real ‘lowflation’, and it was a blessing for the average worker, not a scourge.

This post was published at David Stockmans Contra Corner by David Stockman ‘ February 20, 2016.

C-suite Lemmings Heading For The Cliff – -Still Pursuing Massive Share Buybacks

In the midst of a gloomy earnings season, the share buyback machine has remained in overdrive, and some experts are cautioning it will all end badly.
Companies, even those that are missing profit and sales estimates and cutting outlooks, or restructuring and cutting jobs, are still announcing buybacks. Coming after a long period of intensive spending on shareholder returns, the news is bad for investors hoping to see a return to growth.
‘We continue to be skeptical about how companies are deploying capital, especially when it’s tied to stock-based compensation,’ said Ben Silverman, vice president of research at InsiderScore, a research firm that tracks buybacks and legal insider trading for institutional clients. ‘We believe buybacks can be used to mask management’s inability to grow the business and be innovative thinkers.’
William Lazonick, professor of economics at University of Massachusetts Lowell and director of the Center for Industrial Competitiveness., went a step further, suggesting that buybacks have the potential to push the U. S. into recession. He argues that companies are using them to prop up share prices at the expense of reinvesting in the business and supporting job stability and long-term growth.

This post was published at David Stockmans Contra Corner on February 5, 2016.

Central Bank Money Printing – -The Rotten Philosophy Beneath

If advocates of freedom were to make up a list of New Year’s resolutions for 2016, one of the most important items should be ending government’s monopoly control over money. In a free society, people in the marketplace should decide what they wish to use as money, not the government.
For more than two hundred years, practically all of even the most free market advocates have assumed that money and banking were different from other types of goods and markets. From Adam Smith to Milton Friedman, the presumption has been that competitive markets and free consumer choice are far better than government control and planning – except in the realm of money and financial intermediation.
This belief has been taken to the extreme over the last one hundred years, during which governments have claimed virtually absolute and unlimited authority over national monetary systems through the institution of paper money.
At least before the First World War (1914-1918) the general consensus among economists, many political leaders, and the vast majority of the citizenry was that governments could not be completely trusted with management of the monetary system. Abuse of the monetary printing press would always be too tempting for demagogues, special interest groups, and shortsighted politicians looking for easy ways to fund their way to power, privilege, and political advantage.
The Gold Standard and the Monetary ‘Rules of the Game’
Thus, before 1914 the national currencies of practically all the major countries of what used to be called the ‘civilized world’ were anchored to market-based commodities, either gold or silver. This was meant to place money outside the immediate and arbitrary manipulation of governments. Any increase in gold or silver money required private individuals to find it profitable to prospect for it in various parts of the world; mine it out of the ground and transport it to where it might be refined into usable forms; and then mint part of any new supplies into coins and bullion, with the rest made into various commercial and industrial products demanded on the market.

This post was published at David Stockmans Contra Corner on January 4, 2016.

The Wrong Kind of Fertile Ground

On December 11, 2014, spot WTI closed at $60.01, down sharply from $76.52 the week before that Thanksgiving. In the space of only a few weeks, oil prices had collapsed far more than anyone thought possible; and yet there was very little urgency to the outcome. Economists, in particular, parroted throughout the media, were quick to assert both a supply ‘glut’ as well as how very beneficial low oil prices were in macro terms for consumers. Paradoxically, Janet Yellen’s increasing use of the word ‘transitory’ meant that on one side the decline in oil prices wasn’t meant to last even though on the other that meant the consumer ‘benefit’ would not either. Thus, in orthodox terms it was better that oil prices would return to oppressive levels and therefore any consumer aid was just the silver lining for the interim.
The word ‘transitory’ would define, then, not just oil prices themselves but an entire array of market balances and economic interpretations that come from oil being the economic center of even a services economy. In terms of assets, junk and high yield corporates were uniquely bombarded by the ‘unexpected’ oil crash, leaving many investors to lighten up in what was a great shift in probabilities and perceptions – better to sell a little just in case Yellen got it wrong.
Even though oil fell below $50 spot WTI as soon as January 6, 2015, and then even flirted with the $30′s not long after, by the middle of the year WTI was back above $55 and even intermittently in the very low $60s. For many, far too many, that seemed as if Yellen had it right and that junk bonds were being overly cautious even when the prior year’s selloff (to December 16) was being limited in commentary to just the oil sector. By mid-year, oil and gas were back within the dominant narrative:

This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ November 30, 2015.

Kim Young-sam, RIP – – -The Heroic Leader Who Stopped Ashton Carter’s War In Korea

Former president Kim Young-sam was laid to rest in Seoul at a state funeral on Thursday. Elected to the National Assembly at age 25, he first broke with autocratic President Syngman Rhee and later was expelled from the Assembly by General turned President Park-Chung-hee, the current president’s father. Kim then battled Park’s successor, Chun -Doo-hwan, who was forced to hold elections in 1987.
Kim was elected five years later, completing the transition away from military rule. The troops stayed in their barracks, though his reputation suffered when the Republic of Korea was engulfed by the Asian economic crisis and his son was arrested on bribery and tax charges. But Kim’s most important success overshadowed such blemishes: he may have prevented the Second Korean War.
That was no modest feat, given the position of President Bill Clinton, Secretary of Defense William Perry, and Assistant Secretary of Defense Ashton Carter, the current Pentagon chief. The three were ready and willing to plunge the peninsula into another conflict, which could have been as horrific as the first one.
Early during Kim’s tenure the first Korean nuclear crisis exploded. The so-called Democratic People’s Republic of Korea embarked on a nuclear program, centered at Yongbyon. The U. S. government decided to strike. Kim then received a phone call at dawn from Clinton. In his memoir Kim recounted that he told his counterpart that airstrikes ‘will immediately prompt North Korea to open fire against major South Korean cities from the border.’ Most at risk was Seoul, which is the country’s political and cultural heart. Half of the ROK’s population resides in the Seoul-Inchon area.
War was a truly mad idea, but apparently became official Washington policy with little thought. In 1993 Carter was appointed to direct a DOD task force which, reported West Point’s Scott Silverstone, ‘drafted a paper for the National Security Council that recommended a military attack on Yongbyon.’ Carter’s colleagues reported that he ‘wanted military options taken very seriously.

This post was published at David Stockmans Contra Corner on November 27, 2015.

‘Regretfully, We Are Bankrupt’: A Short History Of Greece, Italy And The 19th Century Latin Monetary Union

It is now largely overlooked, but the 19th century had its own precursor to EMU in the shape of the Latin Monetary Union, set up principally to try to solve the hoary problems of silver:gold bimetallism. But, if much of the Union’s history was dogged by the narrow technical issues of how, firstly, to structure its members’ own monetary system and, thereafter, to align it more closely with those of the non-members, there were other features, too, which are still very much germane today.
Unrealistic expectations, short-term politics, and – as ever – too much debt plagued both Greece and Italy in those days, too, with repercussions for the other LMU members as well as for their trading partners in the wider world.
[The following appears as Chapter II in my book ‘Santayana’s Curse’available on Kindle]
Among the more germane of these is the extent to which the French government’s desire to broaden its diplomatic reach, to enhance its international prestige, and – let us be charitable – to facilitate the work of its wealth creators was stymied by the opposition of the Banque de Franceto any move to the unique gold standard which was adopted as a goal of the conferences, almost from the off, in recognition of the emergent consensus regarding the impossibility of maintaining a full bimetallic standard.

This post was published at David Stockmans Contra Corner on July 6, 2015.

Now Its Getting Serious – – -Even The Feds Say The Market’s Vastly Overvalued

NEW YORK (MarketWatch) – Wall Street can’t say it hasn’t been warned.
The Office of Financial Research, the agency tasked with promoting financial stability and keeping an eye on markets, released a paper last week stating that the stock market is dangerously overpriced, and that excessive leverage will exacerbate the next market correction.
The paper is aptly titled ‘Quicksilver Markets’ alluding to when prices deflate, it will happen swiftly and not without pain.
‘The timing of market shocks is difficult, if not impossible, to identify in advance, let alone quantify – a shock, by definition, is unexpected,’ wrote Ted Berg, an analyst at OFR.
But Berg identified several indicators that are pointing to a correction. Instead of looking at valuation in isolation, Berg and his team analyzed other factors, such as corporate profits and leverage, and found a disturbing picture.
He argued that forward price-to-earnings ratios are not very good predictors of market downturns, as they tend to be biased during boom times, but other metrics, such as the so-called CAPE ratio, Q-ratio and Buffett indicator all offer warning signs.
Just to provide a little context for the less technically minded market watchers, the CAPE ratio is the ratio of the S&P 500 index to trailing 10-year average earnings. Q-ratio is the market value of nonfinancial corporate equities outstanding divided by net worth, while the Buffett Indicator describes the ratio of corporate-market value to gross national product. All three of those metrics are approaching two standard deviations above historical means, while forward P/E ratios are within historical norms.

This post was published at David Stockmans Contra Corner by Marketwatch ‘ March 25, 2015.