by Zero Hedge - December 6th, 2016 1:46 pm
For most retail investors, buying physical crude oil as a commodity is not an option. Instead, many investors turn to exchange traded notes (ETNs) as a way to speculate on changes in oil prices themselves.
But direct oil investment products like USO have always been dicey as investment choices. More sophisticated investors with big Wall Street banks who have high speed trading and information advantages can essentially front run products like USO which trade oil contracts on a predictable basis. As a result, USO has been a far from perfect tool to replicate oil’s price movements.
By the same token, leveraged structured products including some oil ETNs are an even worse choice. For evidence of that, one need look no further than UWTI, the leveraged exchange traded note run by Credit Suisse. Credit Suisse recently announced that it was shutting down UWTI and a similar but slightly smaller leveraged ETN also focused on oil.
The problem with products like UWTI is not that the product is unsuccessful, but rather that it is broken. UWTI was supposed to give investors triple the daily exposure to a crude oil index. That meant gains or losses from speculating on oil could be substantially magnified by investors using the product. For that reason, the daily dollar trading value of UWTI was roughly the same as the dollar value of megacap Exxon Mobil’s daily trading volume.
Similarly, UWTI has incredible liquidity – roughly half its shares turned over on any given day. That was largely driven by the fact that ETNs are not appropriate long term investments because of the transactions costs they incur in operations. Unfortunately for traders, those transactions costs add up over time – that’s true in the case of UWTI and virtually all other leveraged ETNs.
In the case of UWTI, this meant that the shares lost 99.6 percent of their value over the last four years even as oil has only fallen by 50 percent. The only thing that stopped UWTI from ending up as one of the cheapest of penny stock investments is that the shares went through multiple reverse splits. Investors in UWTI were virtually guaranteed to lose money on the shares if they held them for even a short time, especially when compared to the alternative of
by Zero Hedge - December 6th, 2016 1:42 pm
Prime Minister Renzi was forced to resign. The people of Italy and liberty lovers around the world rejoice in their victory, as another globalist puppet is toppled. This trend is unfolding now at a rapid pace and is one that is not going to stop anytime soon, much to the globalists’ disappointment.
Brexit, followed by the victory of Donald Trump and now the defeat of Renzi’s constitutional referendum bill that has seen him resign, is highlighting the reality we now live in, a reality in which people are waking up at a rate never before seen in our world history.
People are sick and tired of being ruled over by an elite few, pulling the strings of our hand-picked prime ministers and presidents. The people want change, as it is blatantly obvious that the push towards globalism has done nothing to enrich the lower and middle class people of the world.
This fact should be celebrated by all, as this is the very same group of people who have manipulated our markets, including precious metals, and instilled the horribly flawed fiat money system that we are now forced to operate under.
The fight may be far from over, and in all honesty will never truly end, but for a moment we should step back and take a look at exactly what has happened and bask in the glory of how many globalist puppets have been defeated in 2016 alone, a year that will go down in the books as one of the most radical changes in our world’s long history.
First, there was the British Prime Minister David Cameron, who resigned after his surprise defeat in the Brexit referendum, largely led by the liberty lover Nigel Farage.
by Zero Hedge - December 6th, 2016 1:28 pm
Following today’s tweet and follow up suggesting that Trump is now targeting Boeing’s contract pricing practices, questions emerged whether the President-elect wasn’t engaging in a conflict of interest due to his numerous, existing shareholdings. However, according to Trump spokesman Jason Miller, Donald Trump sold all of his stockholdings in June, removing himself from positions in numerous U.S. companies.
Miller made the revelation during a phone call with reporters on Tuesday morning. He was asked about Mr. Trump’s past holdings in Boeing Co., a company the president-elect had criticized earlier in the day for what he alleged were high costs for the next Air Force One, the WSJ reported.
“The President-elect sold all of his stock back in June,” Miller said. He subsequently clarified he was referring broadly to all of Mr. Trump’s stock, not Boeing specifically.
As his publicly disclosed asset list reveals, Trump had at least two brokerage accounts that held roughly 150 separate corporate stock and bond investments, according to a filing he submitted to the U.S. Office of Government Ethics in May. These included investments in a wide range of well-known companies, including Amazon.com Inc., Apple Inc., Boeing and Visa Inc. Trump’s stock portfolio was worth roughly $40 million as of December 2015. The President-elect had between $50,000 to $100,000 of Boeing Co. stock when he filed his personal financial disclosure on May 15.
As a reminder, two months later, in early August, Trump said “it’s time to sell stocks” and warned of “very scary scenarios” for investors. We now know that at least he had followed his advice. As to whether it is a very scary time for investors, we look forward to an upcoming tweet, warning that the market is “yuugely overvalued.”
Trump has a number of investments, including real estate properties, around the world. Some critics have alleged that parts of his portfolio could pose conflicts of interest, based on policies pursued once in the White House or moves by companies or foreign governments to try to curry favor. Liquidating his stock portfolio could alleviate some of those concerns, but House Democrats have pressed for more information about how he will manage his real estate holdings.
As the WSJ notes, Trump is expected to talk more about his business investments at a Dec. 15 press conference.
by Zero Hedge - December 6th, 2016 1:06 pm
The Pentagon’s goal was simple, empower the Defense Business Board (DBB), a federal advisory panel of corporate executives, to retain consultants to identify potential cost savings in the Department of Defense’s $580 billion budget. But, when the DBB study revealed a “clear path to saving over $125 billion,” a level of waste which spoke to the egregious mismanagement and incompetence of DoD leaders, it was clear something had to be done to bury the story. Now, according to the Washington Post, that is exactly what happened.
The Pentagon has buried an internal study that exposed $125 billion in administrative waste in its business operations amid fears Congress would use the findings as an excuse to slash the defense budget, according to interviews and confidential memos obtained by The Washington Post.
Pentagon leaders had requested the study to help make their enormous back-office bureaucracy more efficient and reinvest any savings in combat power. But after the project documented far more wasteful spending than expected, senior defense officials moved swiftly to kill it by discrediting and suppressing the results.
The report, issued in January 2015, identified “a clear path” for the Defense Department to save $125 billion over five years. The plan would not have required layoffs of civil servants or reductions in military personnel. Instead, it would have streamlined the bureaucracy through attrition and early retirements, curtailed high-priced contractors and made better use of information technology.
The study was produced last year by the Defense Business Board with help from consultants with McKinsey and Company. Their report revealed for the first time that the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management.
The data further showed that the Defense Department was paying a staggering number of people — 1,014,000 contractors, civilians and uniformed personnel — to fill back-office jobs far from the front lines. That workforce supports 1.3 million troops on active duty, the fewest since 1940.
Pentagon officials had hoped to use the cost-cutting report to identify opportunities to eliminate “waste” that could
by Zero Hedge - December 6th, 2016 1:06 pm
by Zero Hedge - December 6th, 2016 12:56 pm
We discuss a VIX Trading Setup into the FOMC Meeting next week, with the option to rollover into the January contract as we expect a significant spike in the VIX over the next 6-8 weeks. Buy the VIX into the FOMC Rate Hike Meeting next week at these low levels!
by Zero Hedge - December 6th, 2016 12:46 pm
Under the twisted premise of losing the popular vote and “no taxation without representation”, TIME’s Mark Weston proclaims that the approximately 65 million Democrats who voted for Hillary Clinton should pledge “we won’t pay taxes to the federal government… until democracy is restored.”
Because, It’s just not fair?
Twice in the past 16 years, a Republican candidate who finished second in the popular vote has won the presidency. This year, Donald Trump won the electoral vote with about 46% of the popular vote, while Hillary Clinton received about 48%. If the parties stay this evenly divided, another electoral mishap is more likely than not in the next 20 years.
Most Republicans are quite content with this system. Appeals to fairness have not persuaded them of the need to amend the Constitution to establish direct presidential elections, preferably with a runoff if no one wins 50% of the vote. Nor does the real chance that a Democrat could win the presidency with fewer votes than a Republican alarm them. Even the taunt, “Are you afraid of a direct election? Can’t you win a straight-up vote?” doesn’t faze them. Democrats must, therefore, pester Republicans where it hurts: the pocketbook.
Is signing a pledge to not pay taxes legal? Yes, if no overt act of conspiracy is involved, and the pledge itself is hypothetical. No one knows when or if it would be carried out.
A national movement not to pay federal taxes in the future would put Republicans on notice: they do not have the right to impose a hard-right, second-place presidency on a moderate nation every dozen or so years. If the Republicans won’t help amend the Constitution so that America can resume being a democracy, then Democrats, lacking the representation that supporters of a future popular vote-winner ought to have in the executive branch, should not submit to paying taxes to the federal government.
How would the pledge work?
First, an online group such as MoveOn.org, Change.org or both, should circulate a petition. The pledge is not just a powerful protest; it is also effortless, requiring no legal or financial sacrifice at all for years, possibly decades.
Second, the pledge should only apply to federal taxes. We would still pay state, local, sales and
by Zero Hedge - December 6th, 2016 12:19 pm
To visualize the impact the recent spike in mortgage rates will have on the US housing market in general, and home refinancing activity in particular, look no further than this chart from the October Mortgage Monitor slidepack by Black Knight.
The chart profiles the sudden collapse of the refi market using October and November rates. As Black Knight writes, it looks at the – quite dramatic – effect the mortgage rate rise has had on the population of borrowers who could both likely qualify for and have interest rate incentive to refinance. It finds it was cut in half in just one month.
Some more details from the source:
- The results of the U.S. presidential election triggered a treasury bond selloff, resulting in a corresponding rise in both 10-year treasury and 30-year mortgage interest rates
- Mortgage rates have jumped 49 BPS in the 3 weeks following the election, cutting the population of refinanceable borrowers from 8.3 million immediately prior to the election to a total of just 4 million, matching a 24-month low set back in July 2015
- Though there are still 2M borrowers who could save $200+/month by refinancing and a cumulative $1B/month in potential savings, this is less than half of the $2.1B/ month available just four weeks ago
- The last time the refinanceable population was this small, refi volumes were 37 percent below Q3 2016 levels
Which is bad news not only for homeowners, but also for the banks, whose refi pipeline – a steady source of income and easy profit – is about to vaporize.
It’s not just refinancings, however, According to the report, as housing expert Mark Hanson notes, here is a summary of the adverse impact the spike in yields will also have on home purchases:
- Overall purchase origination growth is slowing, from 23% in Q3’15 to 7% in Q3’16.
- The highest degree of slowing – and currently the slowest growing segment of the market – is among high credit borrowers (740+ credit scores).
- The 740+ segment has been mainly responsible for the overall recovery in purchase volumes and in fact, currently accounts for 2/3 of all purchase lending in the market today.
- Since Q3’15 the growth rate in this segment has dropped from 27% annually to 5% in Q3’16. (NOTE, Q3/Q4’15 included
by Zero Hedge - December 6th, 2016 11:55 am
President-elect Trump’s choice of Gen. James Mattis to be Defense Secretary has raised more than a few eyebrows. Not only as a military officer in a traditionally civilian position, but also as an executive in a leading defense contractor. His views on Iran are also considered extreme and not grounded in reality.
“The Iranian regime in my mind is the single most enduring threat to stability and peace in the Middle East. …Iran is not an enemy of ISIS. They have a lot to gain from the turmoil in the region that ISIS creates.”
Ron Paul asks “Will the mad dog be leashed?” in the following live discussion (starting at 12ET)…
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As Ron Paul detailed earlier, President-elect Donald Trump told a Cincinnati audience this week that he intends to make some big changes in US foreign policy. During his “thank you” tour in the midwest, Trump had this to say:
We will pursue a new foreign policy that finally learns from the mistakes of the past. We will stop looking to topple regimes and overthrow governments. …In our dealings with other countries we will seek shared interests wherever possible…”
If this is really to be President Trump’s foreign policy, it would be a welcome change from the destructive path pursued by the two previous administrations. Such a foreign policy would go a long way toward making us safer and more prosperous, as we would greatly reduce the possibility of a “blowback” attack from abroad, and we would save untold billions with a foreign policy of restraint.
However as we know with politicians, there is often a huge gap between pronouncements before entering office and actions once in office. Who can forget President George W. Bush’s foreign policy promises as a candidate 16 years ago? As a candidate he said:
I am not so sure the role of the United States is to go around the world saying ‘this is the way it’s got to be.’ … If we’re an arrogant nation they will resent us, if we’re a humble nation but strong they’ll welcome us.
Unfortunately as soon as he took office, George W. Bush pursued a completely different foreign
by Zero Hedge - December 6th, 2016 11:50 am
On Tuesday morning, the U.S. Supreme Court, ruling in an insider trading case for the first time in two decades, upheld the conviction of a Chicago man – Bassam Salman – in a decision that could make it easier to prosecute people accused of profiting from confidential information.
The justices, in a unanimous 8-0 decision, ruled against Salman, who was appealing a 2013 conviction stemming from federal charges that he made nearly $1.2 million trading on non-public information that came from his brother-in-law at Citigroup Inc. In the ruling, the justices found that people can be sent to prison for making trades even when the insider who provided the tip wasn’t trying to make money, a key point of contention in previous cases. The court said it’s enough if the insider gave the information as a gift.
Salman had argued that prosecutors in insider trading cases must prove that an alleged source of corporate secrets like the brother-in-law received a tangible benefit like cash in exchange for any tips, something his brother-in-law did not receive. Such proof, prosecutors have said, would make it more difficult for authorities to pursue insider trading cases, potentially preventing cases in which executives tip friends or relatives without any getting anything tangible in return.
Writing for the court, though, Justice Samuel Alito said the court rejected Salman’s arguments, ruling that friends and family members could be held liable even if a tipper provides inside information as a “gift.”
“In such situations, the tipper benefits personally because giving a gift of trading information is the same thing as trading by the tipper followed by a gift of the proceeds,” Alito wrote.
Prosecutors said Maher Kara, a Citigroup investment banker and Salman’s brother-in-law, provided tips about deals involving Citi clients to Kara’s brother, who in turn tipped Salman. A federal jury in San Francisco in 2013 found Salman guilty of conspiracy and securities fraud charges, and he was sentenced to three years in prison.
The Supreme Court heard Salman’s appeal on Oct. 5 amid competing rulings by federal appeals courts in San Francisco, where his case was heard, and New York, where a wave of insider trading prosecutions has been pursued recently.
* * *
The ruling sets an important precedent, and comes at a much needed time for