On the heels of gold trading $20 higher and silver surging 60 cents, today Peter Boockvar issued an ominous warning.
Peter Boockvar: Following the rally from Friday, European bank stocks are up for a 2nd day as more details emerge about a possible private sector involved TARP like program for Italian banks. Officials from the Italian Treasury Department and central bank will be meeting with top bank executives possibly this week. The Euro STOXX bank index is up by 2.3% as of this writing after Friday’s 3% rally with Italian banks again leading the gains. Italian banks have been suffocated by an excess of bad loans and the Renzi government is finally doing something about it…
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Peter Boockvar continues: Italy also reported an in line industrial production figure for February when taken with the January revision. Economic growth for Italy this year is expected to be up by 1.2%. Italian IP remains a whopping 24% off its 2007 peak.
After a 15% jump in January, February machinery orders m/o/m fell by 9.2% but that was better than expectations of a drop of 12%. The January figure was juiced by large iron ore and steel orders but even taking these out saw weak orders in February. The stronger yen is now of course the new issue as in February it rallied from 121 vs the US dollar to 112.70 on the last day of that month. The Nikkei closed down by .4% but that was off its intraday lows and the yen went negative after the market closed. The CFTC on Friday said as of the week ended Tuesday, the net speculative long position in the yen got to just shy of the highest level since 2008.
Never one to the learn the lesson of the futility and complete backfiring of recent easing, BoJ Governor Kuroda said they “won’t hesitate to take additional easing steps if needed to achieve its inflation target.” What perfect timing for the wall that central bankers now face is this week’s IMF meeting where the IMF has given the thumbs up to negative interest rates, a theory and now a practice that has no place in a capitalist system.
The most interesting meeting this week in DC may be the one between Mario Draghi and the German Finance Minister Wolfgang Schaeuble. The WSJ is attributing this quote from Schaeuble to Draghi in response to the success of the political party Alternative For Germany in recent elections: “Be very proud: You can attribute 50% of the results of a party that seems to be new and successful in Germany to the design of this monetary policy.” He also said over the weekend that “there is a growing understanding that excessive liquidity has become more a cause than a solution to the problem.”
As to getting out of this policy, Schaeuble said he told Jack Lew last week that “you should encourage the Fed and we should encourage the ECB and the BoE in a concerted action, to carefully but slowly exit.” Reuters is reporting that over the weekend “Germany’s Finance Ministry denied a report that it would consider taking legal action if the ECB resorts to ‘helicopter money’ distributions to euro zone citizens.” Don’t get me started on the concept of ‘helicopter money’ but I’ll just say this, cash for clunkers.
Another politician in Germany was quoted recently as saying “The disappearance of interest is creating a gaping hole in citizens’ retirement provisions so the efforts many people are making to ensure their prosperity in old age could vanish into thin air.” DZ bank estimates that Germans lost out on 343b euros of interest in their savings accounts between 2010 and 2016 which compares with 144b euros of savings from lowered interest expense. Many Americans we know have suffered the same fate. Politically and certainly economically speaking, the Germans seem to be saying to the ECB that enough is enough.
In China, PPI in March fell by 4.3% y/o/y, the smallest decline since January ’15 and the .5% m/o/m gain was the most since 2013 as commodity prices are finally stabilizing as supply cuts begin to matter and comparisons get easier. The CPI index held steady at a 2.3% y/o/y gain in March, one tenth less than expected but for a 2nd month food prices spiked higher. Consumer prices ex food and energy though were up a more benign 1.5% y/o/y, similar to the trends seen over the past six months. The news on the PPI figure in particular helped the Shanghai index rally by 1.6%.
Peter Boockvar Issues An Ominous Warning
I’ll say again, for all the global talk about deflation, the end of the commodity bear market will be shifting global inflation stats higher in the back half of 2016 and into 2017 I believe, a scenario no one seems to be paying attention to. And if correct, global bond markets are ticking time bombs.
King World News note: Peter Boockvar is absolutely correct about the coming inflation. Art Cashin also issued an ominous warning about this topic in his powerful KWN audio interview this weekend. This is one of the many reasons why the price of gold has been surging. The gold market is anticipating this inflation. Remember, in bull markets virtually all surprises happen on the upside. ***KWN has now released the extraordinary audio interview with legend Art Cashin discussing his greatest fear and the the implication of this for the gold market and much more and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***KWN has also now released the fantastic audio interview with Rick Rule discussing the gold and silver markets and what he is doing with his own money right now and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
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