Gold Continues to Shine, Year to Date Gains Stretch to +30%

Let things settle down for a minute or two. Permit yourself to see the forest through the trees. Now ask yourself, why is gold going higher?

Is it a trade? A bounce? Or does it signify something more meaningful?

Is gold being used to store cash, by wealthy people afraid of their local banker? Is it a repudiation of central bank over planning?

There are a thousand theories as to why gold continues to outperform. In theory, gold is supposed to be an inflation hedge. If so, how can gold trade up 30% for the year when there isn’t any inflation?

My theory is fear. Fear of the unknown, the persistence of central banks to do anything, a careless recklessness to avoid writing down losses, that has given birth to a new era of irresponsibility from our alleged protectors of capital. We’ve become creators of capital for to explicit purposes of financing bloated fiscal budgets.

I’ll repeat that for you. We literally lend ourselves money, by creating new money, in order to fund bloated budgets, because our politicians don’t want to cut back on spending. We are spending way more than we can afford. But if you take away the entitlements, people will get mad and politicians won’t get reelected. This is dereliction of duty at the highest level and everyone is going to pay for these sins.

As such, gold and gold miners are ripping higher today.

I am long GLD, AU, AUY and NEM with 25% of my assets.

This is code talk for getting the hell out of Greece. Where do you think these so called shipping companies reside?

Deutsche Bank is joining a cadre of other European banks in a race to reduce exposure to the beguiled shipping industry.

“They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book,” one finance source said. “They are not looking to exit shipping.”

Deutsche Bank, which has around $5 billion to $6 billion worth of total exposure to the shipping sector, declined to comment.
Germany was one of the world’s main centers of global ship finance before the 2008 financial crisis, and lenders there still have around 80 billion euros ($88.62 billion) on loan to the sector.

“Every bank with a significant amount of shipping loans is evaluating options to sell some of them. The ECB probe has encouraged banks even more to pursue sales,” another banking source said.

“However, it is difficult to agree with buyers on the mix of the portfolio such as performing, less performing, non-performing loans and different types of ships.”

Royal Bank of Scotland is also looking to divest its Greek ship finance business, which is worth around $3 billion, Reuters reported in June.

“It is going to become a more crowded market place and any buyers for these portfolios will want a bigger discount now,” another finance source said.

Wall Street smells desperation. The fact that DB is raising capital by offloading distressed assets is somewhat disconcerting. The stock is getting rocked, down to historic lows.

Again, $18 bill market cap with a balance sheet of $1.8 trillion. I couldn’t care less what their NPLs are. DB is a sell.

Due to an oversold signal in Exodus last week, I initiated a position in triple inverse ETF, EDZ. I made two purchases with an average cost of $31.06. The goal was to hold through 5 trading days or make 5% on the trade. The oversold stats for this signal were too good to ignore.

As the stock Gods would have it, I’ve taken my profits on this 3 day hold for a 7.1% gain. This doesn’t mean that I love stocks and feel we’re heading higher. Instead, I am merely staying true to my discipline.

I made 138bps on the trade and have placed the proceeds in cash, which currently stands at 50%.

I will be taking more of these tactical trades to boost returns.

I can’t remember the last time David Kostin from Goldman Ballsachs was right. It’s almost as if his bosses are throwing hot coffee on him, demanding that he hedge his bearish call with neutrality. Although he’s calling for a 10% drop in stocks in the near term, he believes they will race back, closing out the year at 2,100.

“Although investors appear complacent in the wake of Brexit, a maturing economic cycle with elevated valuations, decelerating buybacks, and growing political uncertainty provide the basis for potential market weakness in the second half,” the team writes. “However, above-trend U.S. GDP growth, a cautious Fed, and an earnings recovery will return the S&P 500 to 2,100 by year-end, extending the flat market of the past two years.”

Useless refuse. No balls.

I can feel your eyes rolling. I know and get it, you’re all smarter than Bill Gross, the man who made House Pimco and was at the top of the fixed income food chain for decades. But maybe, just maybe, he might be able to offer you geniuses a thing or two, in the way of advice.

Our credit-based financial system is sputtering, and risk assets are reflecting that reality even if most players (including central banks) have little clue as to how the game is played,” Gross said in his latest Investment Outlook.

Gross, who runs the Janus Global Unconstrained Bond Fund, had been one of the first advocates for hiking interest rates closer to historic norms. Likening the global financial system to a twisted game of monopoly, he lambasted Federal Reserve officials for relying too heavily on historical models such as the Taylor rule and the Phillips Curve, remarking Fed officials “worship false idols.”

Gross complained that fiscal stimulus has been nonexistent as governments focused on austerity, which has cut economic growth.

“Until governments can spend money and replace the animal spirits lacking in the private sector, then the Monopoly board and meager credit growth shrinks as a future deflationary weapon,” Gross said.

Overall, investors should not hope unrealistically for deficit spending any time soon, Gross said. “To me, that means at best, a ceiling on risk asset prices (stocks, high yield bonds, private equity, real estate) and at worst, minus signs at year’s end that force investors to abandon hope for future returns compared to historic examples.”

Gross said investors should worry, for now, about the return of one’s money, not the return on it.

“Our Monopoly-based economy requires credit creation and if it stays low, the future losers will grow in number,” Gross said.

I’ve given you little trollops a thousand warnings. When you end up in the poorhouse again, don’t come complaining to me.

Unlike yesterday’s currency inspired downgrade of NFLX by Needham, today’s downgrade at Jefferies is having an effect on the share price, currently down 3% in the pre market.

Essentially, they’re hating on the business and multiple.

“Although NFLX’s runway will span multiple years, our research suggests the domestic subscriber growth trajectory may be somewhat flatter than the market’s current expectations,” Jefferies analyst John Janedis wrote in a note to clients Wednesday.

“While Int’l will remain strong, we think the slowing U.S. market will pressure the stock’s multiple.”

Jefferies reduced the price target from $120 to $80. Apparently, they believe it’s a house of cards (sorry, I couldn’t help myself).

Deutsche Bank is down nearly 7% in German trade, death spiraling towards oblivion. With a market cap of $18 billion and balance sheet of $1.8 trillion, no bank in the history of the world has ever been more leveraged.

I’m making no assumptions about the big German bank, other than stating the obvious. Things have gotten progressively worse since the Greek debt crisis and have been exacerbated to the downside with negative rates. The Germans will end up hanging themselves by their own petard.

US futures are down more than 100. Both gold and silver are higher and treasuries have hit record highs, as investors seek safe haven.

Over in Europe, the Italians are getting it worst, off by nearly 2.5%.

The Japanese yen is getting woefully close to the 100 mark to the dollar, now trading at 100.65, -1.1%.

Without question, a crisis of monumental proportions is building. Board the ark.

Watch every second of this video and absorb it into your thick, fucking, skulls. You’re all laughing now. Very soon, you will be shining my shoes for convincing you to board the ark.

China’s debt bubble is unprecedented, unsustainable, and is getting increasingly egregious as growth slows.

Morgan Stanley’s head of EM weighs in heavy.

The heavily indebted country of Japan can borrow as much as they like, out 20 years, and pay zero interest to boot. Once the 30 and 40yr bonds go negative, the entire Japanese yield curve will be negative. At the present, Japan can borrow as much as they like, going out 40 years, for 0.08%.  Should you go buy a television on one of your credit cards, you’ll be paying 39.99%.

Are we clear?

Free money is only free for the select few.

The US 10 yr is down to 1.34%, down 2 bps. Listen to me, investors can’t buy these bonds fast enough. From Germany to Italy to fucking Portugal, money is seeking out bonds and buying them. The QE programmes in Europe and Japan are perverting the market place and advantageous traders are front running them, which is why American bonds trade at a discount to those in Europe.

Japanese 10 yrs are now yielding -0.26%.

I bet you think I am kidding with you when I say the fate of the western world lies in the yen-dollar cross? I am not fucking with you. The yen is higher by another 0.86% v the dollar this evening, to 100.92, bringing out all of the Count Draculas into Asian trade. The NIKKEI is getting pummeled at the open, currently off by 2.4%. Should that cross break 100, I assure you, it will be the death knell to this facade of a bull market. The fucking seals from hell will be lifted and centaurs will kick in your doors and demand money.

DAX futures are down 0.66% and the risk off crowd are gleefully goose marching throughout Wall, clad in their pajamas.

Gold is indelibly higher by 0.5%. Silver is being bid up by Chinese farmers, higher by 1.5%.

The pound has broken down to Margaret Thatcher levels, now below 1.30 v the dollar. And, lastly, the dollar is lifting again v the yuan again–something that no one seems to be interested in.

Fresh low are in for the CNH, as they manipulate their way through the world with a cheap currency and barrels of silver coins in tow.

With today’s delightful move lower in the NIKKEI, it is now off by 20% for 2016–aka in ‘bear market territory.’