Strange Moves in Gold, Federal Reserve Policy and Fundamentals

By Pater Tenebrarum

Counterintuitive Moves

Something odd happened late in the day in Wednesday’s trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages.

A strong ADP jobs report for March was released on Wednesday, and the gold price dutifully declined ahead of it already, while the stock market surged concurrently. Later in the day, the Fed minutes were published, and their tone was definitely seen as very “hawkish”, at least by today’s standards.

Strange happenings alert!

There was quite a bit of talk about rate hikes and – gasp! – even about ending reinvestment of funds the Fed receives when debt securities in its QE portfolio mature. The merry pranksters also bemoaned the egregious bubble their own policies have given birth to.

According to Reuters:

“Most Federal Reserve policymakers think the U.S. central bank should take steps to begin trimming its $4.5 trillion balance sheet this year as long as the economic data holds up, Fed meeting minutes showed.

The minutes also showed “some participants viewed equity prices as quite high relative to standard valuation measures.” [duh…]

(emphasis added)

Here is a 15 minute candle chart encompassing Wednesday’s intra-day moves in June gold futures:

June gold futures, 15 minute candles. After at first declining in anticipation of a strong ADP report and hawkish Fed minutes, gold rebounded when said minutes were released – and actually sounded even more hawkish than expected – click to enlarge.

Talk about “balance sheet normalization” – with the added twist that “most” committee members seemed to think it was an idea whose time had come – apparently was indeed a bit of a surprise to market participants, who probably (and quite reasonably) assumed it would never happen. Not surprisingly, they have already gotten over the “shock” as of Thursday’s trading, but in this case, their initial reaction actually made sense.

An Endangered Bubble and Discounting the Future

What will happen, if the Fed actually allows its balance sheet to shrink by no longer reinvesting money it receives for maturing securities? Unless inflationary bank credit expands at a faster rate than the repayments, this will invariably result in shrinking the money supply. Essentially, it would be a reversal of QE – a part of the deposit money created by debt monetization would return to where it originally came from, namely thin air.

You have one guess what will happen to “risk assets” if and when free excess liquidity in the system begins to evaporate. Here is a hint: it will be time to wave good-bye to the bubble. Stock market traders actually had the right idea on Wednesday afternoon:

S&P 500 intra-day – the Fed minutes triggered a brief moment of quite apposite bubble doubt – click to enlarge.

Before we continue, we want to stress that we are using Wednesday’s odd market moves merely as …read more

Source:: Acting Man

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Have the Neocons Gotten to Trump?

By David Stockman

This post Have the Neocons Gotten to Trump? appeared first on Daily Reckoning.

[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and the fiscal threats from politics and the debt ceiling, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back to any American willing to listen – before it is too late. To learn how to get your free copy CLICK HERE.]

The Donald’s emerging incapacity for even a semblance of normal governance might as well be called a Gong Show, and one that only get crazier by the day.

Take the most recent so-called gas attack in Syria and the Trump Administration’s seeming 180 pivot within just seven days.

This reversal is typical of the Donald and at the heart of why he will never govern effectively.

Just last weekend, for example, he began arguing publicly that it was his idea to pull the Obamacare repeal and replace bill. Actually, it was his inner circle, lead by Steve Bannon, who marched up to Capitol Hill on Thursday night and decreed that all negotiations and tweaking were over and that there should be an up or down vote on Friday afternoon, ready or not.

As far as I can tell, the Donald relented only at the last minute Friday afternoon when Speaker Ryan got down on one knee in the Oval Office to beg Trump’s agreement to pull a bill that was going down by 40-50 votes or more.

What I’m saying is that whirling dervish cannot lead or make anything happen amidst the checks and balances ridden contraption that the founders created. And the interest groups have wrapped their money-spewing tentacles all around both ends of Pennsylvania Avenue.

So the Syrian spectacle is just par for the course.

Last week Trump’s Secretary of State properly announced that “regime change” in Syria is over and that the Assad government can stay.

After all, in the scale of things the threat of the murderous Sunni jihadists — whether ISIS, Nusra Front or a dozen more like minded butchers — is infinitely more serious than the harsh, despotic regime of Bashar Assad.

Whether he goes or stays is none of America’s business, of course, but he did attain power through constitutionally valid means and does maintain a secular state that includes numerous minorities including Christians in addition to his own Alawite (Shiite) tribe.

Even Trump’s hawkish, foreign policy-illiterate ambassador to the U.N. was seemingly on board. Said former South Carolina governor and ex-bookkeeper for her mother’s mail order business, Nikki Haley:

You pick and choose your battles and when we’re looking at this, it’s about changing up priorities and our priority is no longer to sit there and focus on getting Assad out…

Do we think he’s a hindrance? Yes. Are we going to sit there and focus on getting him out? No…

We can’t necessarily focus on Assad the way that the previous administration …read more

Source:: Daily Reckoning feed

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Diamond giant Alrosa offices raided – report

By analyst

By Frik Els

According to media reports the offices of Alrosa (MCX:ALRS), the world’s top diamond producer by output, were raided by Russian security services on Thursday as part of an investigation into asset sales the company undertook in 2011 and 2013.

Reuters reports Russia’s Federal Security Service or FSB raided the Moscow offices of Alrosa in relation to Alrosa’s divestment of a number of assets including a 51% stake in Timir iron ore project to Evraz and the ultimately unsuccessful negotiations with Russian oil giant Rosneft to offload the diamond miner’s gas fields.

Alrosa, worth $12 billion on the Moscow Stock Exchange, posted a fourfold increase in total profit to $2.31 billion (133.5 billion roubles) for 2016.

Moscow sold a 10.9% stake in the company last year raising $813 million for state coffers

The miner, majority-owned by the Russian government and the far eastern province of Yakutia where most of its operations are based, said profit attributable to shareholders totalled $2.25 billion (131.39bn roubles) last year, versus $530K (30.67 million roubles) in 2015, thanks to a global recovery in diamond prices. Moscow sold a 10.9% stake in the company last year raising $813 million for state coffers.

“2016 was a year of active recovery in the diamond market following the decline of 2015,” Alrosa’s chief financial officer Igor Kulichik said in the statement. “The company managed to deliver record-high financial performance and generate net cash flow sufficient to repay short-term and medium-term liabilities and pay out dividends to shareholders,”

Earnings before interest, tax, depreciation and amortization, however, fell 30% in the fourth quarter, becoming the second-worst quarter in the Alrosa’s history due mostly to a weakened demand for gems.

The diamond miner, which is planning to increase production by 6% to 39.2 million carats this year, appointed last week Sergei Ivanov, the son of a close advisor to Russian president Vladimir Putin, as its new president.

Hat tip: ID

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…read more

Source:: Infomine

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Exclusive KE Report Commentary – Thu 6 Apr, 2017

By Cory A comprehensive update from Theralase

After a couple news releases this week we have Roger White, CEO and President of Theralase to provide an update. The Company has treated one patient and has two more enrolled. We discuss the progress of the trails and what investors can expect for the rest of the year. We also touch on the brain cancer division and the financial condition of Theralase.

Click here to visit the Theralase website.

Download audio file (06_Apr_2017-Roger-White.mp3)

…read more

Source:: The Korelin Economics Report

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Craig Hemke from TF Metals Report – Thu 6 Apr, 2017

By Cory Recapping the Fed minutes and the COT report for silver

The Fed minutes had a couple interesting highlights that included a discussion on unwinding the balance sheet as well as a comment on stock valuations. The minutes did move stocks in the way you would think (down) but only for a short time. Yields did not react how they should if the market actually believed the Fed would be unwinding the balance sheet. Craig Hemke and I discuss these factors as well the COT report for silver… Open interest is almost at record highs again.

Download audio file (06_Apr_2017-Craig-Hemke.mp3)

…read more

Source:: The Korelin Economics Report

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Richard Postma – The Doctor Is In – Thu 6 Apr, 2017

By Cory Factors keeping the markets levitated

There are always a number of reasons to sell the markets but there are a few examples that explain how the markets are staying levitated. Doc and I discuss how increasing margin, ETF inflows, and the fact that the last quarter was the quietest for the Dow all contribute to market valuations.

Download audio file (06_Apr_2017-Doc.mp3)

…read more

Source:: The Korelin Economics Report

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The Long and Short Of It: Marketplace Lending

marketplace-lending-1

By Investment U Research Team

Eight years ago, the global financial crisis changed the way we think about debt. It shook public faith in the big banks—some of which didn’t survive the meltdown. And in the process, it made room for the rise of marketplace lending.

This financial innovation consists of online exchanges where ordinary people make unsecured high-interest loans to other ordinary people. That’s why marketplace lending is also known as peer-to-peer lending. By matching lenders directly to borrowers, it takes the bank middleman out of the debt market.

Since its inception in the late 2000s, marketplace lending has seen good and bad years. Today, an imminent interest rate hike has made its future uncertain. By learning more about the young peer-to-peer loan market, we can take a better guess about its fate.
The Case for Investing In Marketplace Lending
Peer-to-peer lending expanded rapidly in the early days of the Great Recession. Interest rates were at rock-bottom, making it hard for investors to find yield in traditional banking products.

And the ensuing credit crunch made it hard to get approved for personal loans. Thus, many borrowers couldn’t get service at banks. Instead, they went to online marketplaces for financing. Two of the most prominent are OnDeck (NYSE: ONDK) and Lending Club (NYSE: LC).

Lending Club sorts its loans into almost 40 risk grades. Annual interest rates range from 6% for high-credit borrowers to 36% for risky borrowers. That makes them very competitive with traditional debt investments. It’s no wonder that marketplace loans soared 700% between 2010 and 2014.

What’s more, the marketplace lending process is considerably faster than traditional banking. Peer-to-peer borrowers can fill out an application in minutes, and get their funds in a few days. By contrast, traditional loans often take weeks to process.

This is partially because peer-to-peer networks like Lending Club and OnDeck have managed to stay under the radar of Dodd-Frank authorities and other regulators. But as we’ll see in a moment, that may change soon.

Peer-to-peer lending is fast and easy for borrowers. And it can be very profitable for investors. It’s especially competitive in times of scarce credit or low interest rates. But that doesn’t mean it’s a panacea for every problem in the debt markets. Marketplace lending also has some significant weaknesses. And some haven’t been addressed yet.

[iu-adbox]
The Case Against Investing In Marketplace Lending
Take a quick look at the stock performance of OnDeck and Lending Club. It becomes pretty clear that there are some problems under the hood. Both companies are down almost 50% in the last year.

Why have these promising financial-tech disruptors tanked so hard? There are a few reasons. Perhaps the biggest is that marketplace loans are unsecured personal debt. The only risk management involved in the process is a brief credit check. And as Lending Club’s 36% top annual interest rate implies, some of these loans are really risky.

Back in 2008, the SEC made a foray into regulating these industries. They required them to securitize their loans, in accordance with the 1933 Securities Act. Private marketplace lender Prosper managed to …read more

Source:: Investment You

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FED SHOCKER: “News Noise” Crushes Stocks…

By Greg Guenthner

This post FED SHOCKER: “News Noise” Crushes Stocks… appeared first on Daily Reckoning.

It was another quiet day in the markets.

That’s when all hell broke loose…

The major averages were humming along yesterday. The Nasdaq Composite even notched a new all-time high.

But everything started to fall apart just after 2 p.m. The major averages suddenly dropped deep into the red. As MarketWatch notes, it was the biggest one-day reversal for stocks in more than a year…

The market’s slide began after the Fed minutes revealed some members believe stock prices are too high.

Is this the real reason the market took a hit Wednesday?

We’re not so sure.

Instead of getting bogged down in Fed gossip this morning, I’m going to tell you a story about a famous financial writer who discovered a unique way to tune out the “news noise”.

You may have heard of Joe Granville. Joe was a larger-than-life character in the investment world.

Joe was a showman. He’d start his speaking engagements by springing out of a coffin, or by wearing an Elvis costume. Once, he stunned an audience at a Phoenix, Arizona hotel by walking across the surface of the hotel’s swimming pool.

(In reality, Granville had the hotel staff rig a plank for him to walk on just below the surface of the water.)

But Granville’s biggest feats were his market calls…

“Despite all the flair, he was a serious market analyst who created some original technical indicators that are still used to this day,” my colleage Jonas Elmerraji explains. “Studies done since Granville retired his market letter showed that his early market calls to predict the Dow Jones Industrial Average actually beat the market by a statistical meaningful margin over the decades.”

Because of that accuracy, investors far and wide hung onto his words.

At his peak, Granville was attributed with causing major market moves in the Dow as readers flocked to follow his advice…

“On Monday, April 21, 1980, for instance, Granville shifted his market call from 100% bearish to 100% bullish – it was such big news at the time it landed him on the cover of the New York Times,” Jonas continues. “When the market opened, it gapped up more than 4%, a move so large that trading was suspended.”

That influence got Joe audiences with presidents, CEOs, and the media.

But I’m not here to talk about Granville’s larger-than-life personality, or his boisterous market calls…

You see, old Joe still has an important lesson to teach us today. And it all comes down to his TV.

Later in life, Joe moved to Arizona, where he continued analyzing the markets daily. There was just one problem – where to find live stock quotes to use in his work. While the internet had emerged as a valuable tool to deliver real-time market data, Joe wouldn’t have it. You see, Joe was worried that the government was watching him, so he refused to use a computer.

(Given the number of U.S. presidents Granville had met over his lifetime, maybe he was onto something.)

So instead, he bought a …read more

Source:: Daily Reckoning feed

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ObamaCare Vs TrumpCare – Here Are the Winners

Zach Scheidt

By Zach Scheidt

This post ObamaCare Vs TrumpCare – Here Are the Winners appeared first on Daily Reckoning.

My research team and I just crunched all of the numbers…

And we’re finally ready to weigh in with OUR TAKE on the ObamaCare vs TrumpCare debate.

We’ve left no stone unturned. And today we’ll show you everything, including our list of LOSERS and WINNERS.

With debates raging in Washington, let’s take a look…

And as you can imagine, the new TrumpCare bill proposes some major policy changes to existing ObamaCare…

This means potentially HUGE shakeups in healthcare investments- and as our research shows, namely, the downfall of health insurers…

Since ObamaCare became law in March 2010, health insurance companies have been the big winners:

UnitedHealth Group (UNH) up 506%
Aetna Inc. (AET) up 449%
Humana Inc. (HUM) up 407%

The reason for the massive gains?

Believe it or not, the most controversial part of ObamaCare was the catalyst: The Individual Mandate.

This mandate required all individuals to acquire health insurance in one way or another… Or pay a fine.

To offset high insurance costs, government subsidies were given to facilitate low income families.

These families then signed up for coverage with private insurers, who have since continued to rake in Uncle Sam’s subsidies- sending the sector skyrocketing.

However, under TrumpCare, this is all set to change.

President Trump has been a vocal critic of the individual mandate, which means under TrumpCare, people could potentially forgo health insurance without fear of being fined.

In addition, those that keep health insurance will have their government subsidies lowered substantially… Take a look for yourself with these examples from across the country:

Subsidies in Chattanooga, Tennessee are projected to fall by 53%
Subsidies in Yuma, Arizona are projected to fall by 61%
Subsidies in Allentown, Pennsylvania are projected to fall by 42%

This spells grave danger for insurance companies, who have recently relied on increased customers to boost both profits and share prices.

The bill hasn’t been signed into law yet. But if it does, health insurance stocks should watch out below.

But, while the debate rages on, I didn’t want to leave you empty handed. That’s why my team and I looked at the WINNERS in this situation…

Here’s the sector primed to surge:

This idea came to me as I was leaving our headquarters in Baltimore, Maryland…

We’ve all been there before– slouched over driving through bumper-to-bumper traffic.

This time I was crawling through the prestigious Johns Hopkins Hospital campus– an area constantly under construction.

When I wasn’t being cut-off or rerouted, I’d admire the sky-high cranes and newly constructed buildings. I had a front-row seat to Baltimore’s major healthcare build-out.

But the story I want to share with you today is much bigger than that…

This same, HUGE healthcare build-out is happening all over the U.S!

Texas’ $15.8 billion medical construction pipeline is second in the nation -Dallas News

Health-care building boom underway in Colorado Springs area -The Gazette

Booming NYC hospital construction sector expected to reach $8.2B from 2016 to 2018 –Construction Dive

“$97 billion in projects for new hospitals” –Healthcare Finance

You …read more

Source:: Daily Reckoning feed

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Erdene Resource moving forward with flagship project in Mongolia

By analyst

By Cecilia Jamasmie

Canada’s Erdene Resource Development (TSX:ERD), the company that literally struck gold earlier this year after finding its new Mongolia-based gold project was richer than previously thought, expects to move Bayan Khundii towards its maiden resource estimate by 2018.

The firm, one of the very few miners to never have encountered issues in the landlocked Asian country, was granted this week the Exploration Mining Company of the Year award at the Mines & Money event in Hong Kong.

Erdene has already completed 10 km of drilling at its Bayan Khundii gold project, which went from greenfield prospect to being its main asset in roughly nine months.

According to Dawson Brisco, Vice President Corporate Development, the award is considered to be Asia’s most prestigious mining investment awards. He added it’s also a deserved recognition of what the firm has done so far in the landlocked country.

In 2012, Erdene began working on its Altan Nar (meaning Golden Sun) gold-polymetallic project in the Tien Shan Gold Belt of southwest Mongolia at a time when other miners were struggling to achieve agreements with the country’s shifting policy makers.

Shortly after, the firm found a new project — Bayan Khundii — that quickly became its flagship venture and where the Halifax, Nova Scotia-based firm has already completed 10 km of drilling, Erdene’s President and CEO, Peter Akerley, told CNBC Asia, after receiving the award.

The executive believes current conditions in Mongolia couldn’t be better. “Last year in July the Mongolian People’s Party was elected by a landslide victory and that brought in a government that is pro-business and pro-mining,” Akerley said in the interview.

“The country is opening the exploration sector for more licences and it has recently signed a protection agreement with the US and Canada,” he noted as a clear example of the improved business environment in the nation.

While it’s still relatively early days for Bayan Khundii, discovered in late 2015, over the next 12 to 18 months the company expects to define the resource, de-risk the deposit and then move towards production.

In addition to Bayan Khundii and Altan Nar, Erdene Resource has two other exploration licences and a mining permit in southwest Mongolia.

The post Erdene Resource moving forward with flagship project in Mongolia appeared first on MINING.com.

…read more

Source:: Infomine

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