Money Flow Trading Method along with Risk Management

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5 Minute Chart Dow 30

https://finviz.com/futures_charts.ashx?p=i5&t=YM

https://www.zerohedge.com/geopolitic...ation-movement

Escobar: Welcome To The 'De-Westernization Movement'
https://zh-prod-1cc738ca-7d3b-4a72-b.../picture-5.jpg

BY TYLER DURDEN

FRIDAY, SEP 15, 2023 - 11:40 PM

Authored by Pepe Escobar via The Cradle,

In Vladivostok, the Russian Far East rises
In Vladivostok this week, the 'Russian Far East' was on full, glorious display. Russia, China, India, and the Global South were all there to contribute to this trade, investment, infrastructure, transportation, and institutional renaissance.

Russian President Vladimir Putin opened and closed his quite detailed address to the Eastern Economic Forum in Vladivostok with a resounding message: “The Far East is Russia’s strategic priority for the entire 21st century.”

And that’s exactly the feeling one would have prior to the address, interacting with business executives mingling across the stunning forum grounds at the Far Eastern Federal University (opened only 11 years ago), with the backdrop of the more than four kilometer-long suspension bridge to Russky Island across the Eastern Bosphorus strait.

The development possibilities of what is in effect Russian Asia, and one of the key nodes of Asia-Pacific, are literally mind-boggling. Data from the Ministry for the Development of the Russian Far East and the Arctic - confirmed by several of the most eye-catching panels during the Forum - list a whopping 2,800 investment projects underway, 646 of which are already up and running, complete with the creation of several international Advanced Special Economic Zones (ASEZ) and the expansion of the Free Port of Vladivostok, home to several hundred small and midsize enterprises (SMEs)
.
All that goes way beyond Russia’s “pivot to the East" which was announced by Putin in 2012, two years before the Maidan events in Kiev. For the rest of the planet, not to mention the collective west, it is impossible to understand the Russian Far East magic without being on the spot - starting with Vladivostok, the charming, unofficial capital of the Far East, with its gorgeous hills, striking architecture, verdant islands, sandy bays and of course the terminal of the legendary Trans-Siberian Railway.

What Global South visitors did experience – the collective west was virtually absent from the Forum – was a work in progress in sustainable development: a sovereign state setting the tone in terms of integrating large swathes of its territory to the new, emerging, polycentric geoeconomic era. Delegations from ASEAN (Laos, Myanmar, Philippines) and the Arab world, not to mention India and China, totally understood the picture.

Welcome to the ‘de-westernization movement’
In his speech, Putin stressed how the rate of investment in the Far East is three times the Russian region average; how the Far East is only 35 percent explored, with unlimited potential for natural resource industries; how the Power of Siberia and Sakhalin-Khabarovsk-Vladivostok gas pipelines will be connected; and how by 2030, liquified natural gas (LNG) production in the Russian Arctic will triple.

In a broader context, Putin made clear that “the global economy has changed and continues to change; the west, with its own hands, is destroying the system of trade and finance that it itself created.” It is no wonder then that Russia’s trade turnover with Asia-Pacific grew by 13.7 percent in 2022, and by another 18.3 percent in just the first half of 2023.

Cue to Presidential Business Rights Commissioner Boris Titov showing how this reorientation away from the “static” west is inevitable. Although western economies are well-developed, they are already “too heavily invested and sluggish,” says Titov:
“In the East, on the other hand, everything is booming, moving forward rapidly, developing rapidly. And this applies not only to China, India, and Indonesia, but also to many other countries. They are the center of development today, not Europe, our main consumers of energy are there, finally.”

It is quite impossible to do justice to the enormous scope and absorbing discussions featured in the major panels in Vladivostok. Here is just a taste of the key themes.

A Valdai session focused on the accumulated positive effects of Russia's "pivot to the East," with the Far East positioned as the natural hub for swinging the entire Russian economy to Asian geoeconomics. Yet there are problems, of course, as stressed by Wang Wen from the Chongyang Institute for Financial Studies at Renmin University. Vladivostok’s population is only 600,000. the Chinese would say that for such a city, infrastructure is poor, “so it needs more infrastructure as fast as it can. Vladivostok could become the next Hong Kong. The way is to set up SEZs like in Hong Kong, Shenzhen and Pudong.” Not hard, as “the non-western world very much welcomes Russia.”

Wang Wen could not but highlight the breakthrough represented by the Huawei Mate 60 Pro: “Sanctions are not such a bad thing. They only strengthen the “de-westernization movement,” as it is informally referred to in China.

China by mid-2022 slipped into was defined by Wang as “silent mode” in terms of investment for fear of US secondary sanctions. But now that’s changing, and frontier regions once again are regarded as key to trade ties. In the Free Port of Vladivostok, China is the number one investor with its $11 billion commitment.

Fesco is the largest maritime transportation company in Russia – and reaches China, Japan, Korea and Vietnam. They are actively engaged in the connection of Southeast Asia to the Northern Sea Route, in cooperation with Russian Railways. The key is to set up a network of logistic hubs. Fesco executives describe it as “titanic shift in logistics.”

Russian Railways in itself is a fascinating case. It operates, among others, the Trans-Baikal, which happens to be the world’s busiest rail line, connecting Russia from the Urals to the Far East. Chita, smack on the Trans-Siberian - a top manufacturing center 900 km east of Irkutsk - is considered the capital of Russian Railways.

And then there’s the Arctic. The Arctic is home to 80 percent of Russia’s gas, 20 percent of its oil, 30 percent of its territory, 15 percent of GDP, but consists of only 2.5 million people. The development of the Northern Sea Route requires top-notch high-tech, such as a constantly evolving feet of icebreakers.

Liquid and stable as vodka
All that transpired in Vladivostok connects directly to the much-ballyhooed visit by North Korea’s Kim Jong-un. The timing was a beauty; after all the Primorsky Krai region in the Far East is an immediate neighbor to the Democratic People's Republic of Korea (DPRK).

Putin emphasized that Russia and the DPRK are developing several joint projects in transportation, communications, logistics, and naval sectors.
So much more than military and space matters amicably discussed by Putin and Kim, the heart of the matter is geoeconomics: a trilateral Russia-China-DPRK cooperation, with the distinct outcome of increased container traffic transiting through the DPRK and the tantalizing possibility of DPRK rail reaching Vladivostok and then connecting deeper into Eurasia via the Trans-Siberian line.

And if that was not ground-breaking enough, much was discussed in several round tables about the International North South Transportation Corridor (INTSC). The Russia-Kazakhstan-Turkmenistan-Iran corridor will be finalized in 2027 – and that will be a key branch of the INTSC.

In parallel, New Delhi and Moscow are itching to start the Eastern Maritime Corridor (EMC) as soon as possible - that’s the official denomination of the Vladivostok-Chennai route. Sarbananda Sonowal, the Indian minister of ports, shipping and waterways, promoted an Indo-Russian workshop on the EMC in Chennai from October 30 to discuss “the smooth and swift operationalization” of the corridor.

I had the honor of being part of one of the crucial panels, Greater Eurasia: Drivers for the Formation of an Alternative International Monetary and Financial System.

A key conclusion is that the stage is set for a common Eurasia payment system - part of the Eurasian Economic Union's (EAEU) draft declaration for 2030-2045 – against the backdrop of Hybrid War and “toxic currencies” (83 per cent of EAEU transactions already bypass them).

Yet the debate remains fierce when it comes to a basket of national currencies, a basket of goods, payment and settlement structures, the use of blockchain, a new pricing system, or setting up a single stock exchange. Is it all possible, technically? Yes, but that would take 30 or 40 years to take shape, as the panel stressed.

As it stands, a single example of challenges ahead is enough. The idea of coming up with a basket of currencies for an alternative payment system did not gather steam at the BRICS summit because of India’s position.

Aleksandr Babakov, deputy chairman of the Duma, evoked the discussions between the Shanghai Cooperation Organization (SCO) and Iran on trade financing in national currencies, including a road map to look for best ways in legislation to help attract investment. That’s also being discussed with private companies. The model is the success of the China-Russia trade turnover.

Andrey Klepach, chief economist at VEB, quipped that the best currency is “liquid and stable. Like vodka.” So we’re not there yet. Two-thirds of trade are still carried in dollars and euros; the Chinese yuan accounts for only three percent. India refuses to use the yuan. And there’s a huge Russia-India imbalance: as much as 40 billion rupees are sitting in Russian exporters accounts with nowhere to go. A priority is to improve trust in the ruble: it should be accepted by both India and China. And a digital ruble is becoming a necessity.

Wang Wen concurred, saying there’s not enough ambition. India should export more to Russia and Russia should invest more in India.

In parallel, as pointed out by Sohail Khan, the deputy secretary-general of the SCO, India now controls no less than 40 percent of the global digital payment market. It had a share of zero only seven years ago. That accounts for the success of its unified payment system (UPI).

A BRICS-EAEU panel expressed the hope that a joint summit of these two key multilateral organizations will happen next year. Once again, it’s all about trans-Eurasian transportation corridors – as two-thirds of world turnover will soon follow the eastern track connecting Russia to Asia.

On BRICS-EAEU-SCO, top Russian companies are already integrated into BRICS business, from Russian Railways and Rostec to big banks. A big problem remains how to explain the EAEU to India – even as the EAEU structure is deemed to be a success. And watch this space: a free trade agreement with Iran will be clinched soon.

At the last panel in Vladivostok, Russian Foreign Ministry Spokeswoman Maria Zakharova – the contemporary counterpart of Hermes, the messenger of the Gods – pointed out how the G20 and BRICS summits set the stage for Putin’s speech at the Eastern Economic Forum.

That required “fantastic strategic patience.”

Russia, after all, “never supported isolation” and “always advocated partnership.” The frantic activity in Vladivostok has just demonstrated how the “pivot to Asia” is all about enhanced connectivity and partnership in a new polycentric era.

https://mises.org/wire/eurozone-exam...d-keynesianism

The Eurozone: An Example of Failed Keynesianism

1. https://cdn.mises.org/styles/slidesh...?itok=jFoBn6TZ

TAGS Money and Banks

Daniel Lacalle

The eurozone economic figures show the risk of stagflation, and the short-term impact is clear in Germany and France, but it extends to the rest of the countries.

Why has the eurozone lagged the United States and other developed economies in recent years? The enormous stimulus packages, including the 2009 Growth and Job Plan, the Juncker Plan, the New Green Deal, and the Europe Next Generation, are proving that central planning only delivers poor growth, elevated debt, and now high inflation.

The ECB’s latest figures show that monetary aggregates are starting to moderate, but inflation remains high and, in the latest print, is rising.

Consensus estimates of GDP growth in 2023 stand at 0.6% with inflation above 5%, according to Bloomberg, and it is important to remember that core inflation continues to be three times higher than the target of price stability.

Lagarde’s inflation messages seem clear, but the ECB’s target must be met. and interest rate increases are here to stay, although the market estimates that the ECB will start lowering interest rates by 2024. The problem is that the eurozone is only betting on rate hikes to moderate inflation, while governments continue to spend billions of euros on so-called Next Generation Funds and deficits that mean more inflation or taxes in the future.

We should not be surprised that credit in the eurozone is falling along with monetary aggregates. The entire burden of monetary normalization is falling on the productive sector, families, and businesses, while many governments continue to increase deficit spending.

The figures for growth in the eurozone are very poor, but they are even worse when we take into account that Ireland’s progress, as shown by Eurostat, almost entirely explains the most recent upward revision. What does the eurozone do? Instead of incentivizing the economic freedom model, it subsidizes the intervened ones.

The economy is expected to grow slightly in 2023, plagued by high inflation, rising interest rates, and lower exports. The Next Generation funds have no discernible marginal or multiplier effect.

The weak state of manufacturing and service indices confirms this fear. PMIs show a widespread negative trend in new orders and investment.
Hiking rates is not enough when the ECB’s balance sheet is 52% of GDP. Harmonized inflation fell to 5.3% in July from 5.5% in June, due to the base effect and the decline in commodities. However, commodities have been bouncing since May, when the market started discounting the end of rate hikes.

We cannot ignore the fact that the data on eurozone inflation expectations is rising.

The ECB raised its benchmark interest rate to 4.25% from 4.00%, a cumulative increase since July 2022 of 425 basis points. I believe it will end in 2023 at 4.43% and in 2024 at 3.68%, but without finishing the inflation battle.

Despite trillions in deficit and growth central plans, the eurozone faces an environment of poor growth and high inflation with strong headwinds, led by an increase in energy costs and the lagging effect that rising rates can generate, as interest rate increases do not show their full effect on the economy until 12–18 months after they are completed, according to the ECB’s estimates.

We would also remember the EU’s technological problems. While the US and China are leading global technological advances, it seems that the European Union has lagged in growth and investment, but above all in patents and technology companies. The EU does not have technology giants that can challenge the global leaders, and one of the factors that worries us most is the very high level of taxation. It works against the opportunities for creating world-class tech giants.

According to the European Commission itself, taxation in Europe remains at a very high level for capital (27.8%) and labor (21%), two key factors for the development of technology companies. Such high taxation jeopardizes innovation, the attraction of investment, and the improvement of human capital.

If there is a lesson for the United States and the rest of the world, it is that massive central planning does not deliver growth and that governments do not lead economic development and innovation. The eurozone would benefit from a supply-side, bottom-up approach to the economy. Unfortunately, it is doubling down on central planning.

Author:
Daniel Lacalle

Daniel Lacalle, PhD, economist and fund manager, is the author of the bestselling books Freedom or Equality (2020),Escape from the Central Bank Trap (2017), The Energy World Is Flat (2015), and Life in the Financial Markets (2014).
He is a professor of global economy at IE Business School in Madrid.

http://gainspainscapital.com/

Warning, the Second Wave of Inflation Has Arrived

Posted on September 14, 2023 by Phoenix Capital Research

By Graham Summers, MBA

As I noted a few weeks ago, inflation likely bottomed in July.

By quick way of review, the official inflation metric, the Consumer Price Index or CPI, is measured on a year over year basis. So, when the CPI is 5.5%, for instance, what it’s saying is that prices are 5.5% higher than they were during the same month the year before.

As many pundits have noted, CPI has been declining. What they are failing to recognize however is that the only part of the CPI data that has been declining in 2023 is energy prices. And the reasons for this are:
1) Oil prices collapsed for most of the last 12 months after spiking higher during Russia’s invasion of Ukraine in 1Q22.
2) The Biden administration has dumped ~292 million barrels of oil from the Strategic Petroleum Reserve (SPR) forcing oil prices lower.

You can see this for yourself in the table below. Again, the ONLY parts of the CPI that has dropped significantly are energy prices (well that and used cars and medical devices).
https://gainspainscapital.com/wp-con...3-1024x957.jpg

However, this period is now ending. On a year over year basis, energy prices will no longer be down much if at all because we are comparing prices in the purple rectangle to prices in the blue rectangle on a year over year basis. This should result in CPI moving higher.
https://gainspainscapital.com/wp-con.../GPC914232.png

Indeed, CPI for August clocked in at 3.7% year over year. That sounds decent until you realize that CPI was 3.0% in June. That’s quite a rebound in just two months. And bear in mind, core inflation is still well over 4%!

So again, inflation has bottomed. Some investors will profit beautifully from this. Others will get taken to the cleaners.

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https://gainspainscapital.com/wp-con...023/06/SIG.jpg

Did Stocks Just Kiss Good-Bye?

Posted on September 13, 2023 by Phoenix Capital Research

By Graham Summers, MBA

Nearly every market collapse follows a particular pattern.
That pattern?
1) Stocks break down below a critical level of support.
2) Stocks rally to “kiss” this former support, failing to reclaim it.
3) Stocks roll over and the real collapse begins.

This pattern is now playing out with the S&P 500.
The S&P 500 first broke below its 50-day moving average (DMA) in August of 2023. This was a significant development as it was the first time the S&P 500 had lost this support since the March 2023 lows. I’ve illustrated this with a blue rectangle in the chart below.
https://gainspainscapital.com/wp-con...C91323real.png

The market then rallied to retest the 50-DMA from below. It briefly broke above this line in early September, but has failed to hold it.This represents the “kiss” as I mentioned earlier: when stocks try to reclaim critical support but fail to do so. I’ve illustrated this with a purple square in the chart below.
https://gainspainscapital.com/wp-con.../GPC913232.png

What comes next?
Bonds have been telling us for weeks. It’s just a matter of time before stocks “get it.”
https://gainspainscapital.com/wp-con.../GPC913233.png

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https://wolfstreet.com/2023/09/16/fe...gets-refilled/

Fed’s Balance Sheet Liabilities: RRPs Plunge, Reserves Rise after Bank Panic, Currency in Circulation Dips after Pandemic Spike, TGA Gets Refilled
by Wolf Richter • Sep 16, 2023 •

QT’s impact on the Fed’s liabilities, and the massive movements between them.
By Wolf Richter for WOLF STREET.

The daily measure of Overnight Reverse Repurchase agreements (ON RRPs) at the Fed have plunged to $1.40 trillion as of Friday. This is down by 45%, or by $1.152 trillion, from the one-day-wonder peak on December 31, 2022.

Under these RRPs, the Fed takes in cash and hands out collateral (Treasury securities). RRPs are a liability for the Fed because they’re cash that the Fed owes its counterparties. The counterparties are mostly US money market funds, but also banks, and government-sponsored enterprises (Federal Home Loan Banks, Fannie Mae, Freddie Mac, etc.). These counterparties use ON RRPs to park their extra cash risk-free at the Fed, and earn interest.

As of the rate hike in July, the Fed pays them 5.3% in interest.

This 5.3% is less than what the Fed pays banks on their reserve balances (5.4%), so banks don’t use RRPs much. For money market funds (MMFs), ON RRPs are a good risk-free deal, but they pay a little less interest than Treasury bills (around 5.5%). And MMFs have been yanking their cash out of these RRPs, to load up on T-bills.
https://wolfstreet.com/wp-content/up...repo-daily.png

Which Money Market Funds?
The Fed started paying interest on RRPs in the spring of 2021, minuscule rates of interest at the time, at first 0.05% APR and then 0.1% APR because policy rates were near 0%. It did so because there was so much liquidity in the financial system as a result of the then still ongoing QE, chasing after everything, that T-bill yields dipped into the negative.

Treasury money market funds that primarily invest in T-bills were threatened by these negative yields; they could cause the MMFs to “break the buck” where the Net Asset Value of the fund drops below $1, which could trigger a run on the fund, forced selling by the fund, the collapse of a fund, contagion from there, etc., etc., you know the financial panic routine.

The Fed’s solution was to pay a little interest on RRPs, and MMFs flocked to them, and with each rate hike starting in March 2022, the Fed paid more on RRPs.

In addition, MMFs switched some of their cash that they need for liquidity reasons from their bank accounts to RRPs, since banks paid 0% interest, and even now are stingy with the interest they pay. This shift from banks to RRPs via the MMFs caused the banks’ reserve balances to fall starting when QE ended. More in a moment.

The government’s Office of Financial Research publishes RRP balances by money-market funds on a monthly basis, unfortunately with a big delay. The most recent release was for July 31, by which time MMF participation in RRPs had dropped to $1.75 trillion.

The biggest providers of money market funds lead the list: About 29% of these RRPs were with Fidelity’s funds ($508 billion); 10% were with Vanguard’s funds ($172 billion); 8.4% were with JP Morgan’s funds ($148 billion); and 7.9% were with Blackrock’s funds ($138 billion):
https://wolfstreet.com/wp-content/up...MF-monthly.png

Foreign official RRPs and ON RRPs.
The Fed also offers RRPs to “foreign official” accounts, where other central banks can park their dollar cash.

The weekly balance sheet of the Fed – the latest was released Thursday afternoon – shows only balances as of Wednesday every week, not daily balances. So these are balances through Wednesday, which have not yet captured the las two days of the plunge in RRPs.

Foreign official RRPs dropped to $289 billion, down by $94 billion, or by 25%, from the peak in January 2023 (green line).

The chart also shows the ON RRPs (red line) as of Thursday’s balance sheet ($1.546 trillion). Since then, ON RRPs have plunged by another $145 billion, which is reflected in the daily chart above.

Both combined – ON RRPs and foreign official RRPs – have plunged by $803 billion, or by 33%, from the weekly Wednesday peak last September:
https://wolfstreet.com/wp-content/up...Ps-foreign.png

Rising/falling reserves & RRPs don’t negate effects of QE/QT. They’re part of those effects.
The fact that liabilities (mainly reserves and RRPs) rose during QE in equal measure with assets did not negate the effects of QE. And the fact that liabilities have fallen during QT in equal measure with assets does not negate the effects of QT. That’s just how a balance sheet works – it always stays in “balance.”

Massive shifts among the liabilities on the Fed’s balance sheet.
Every balance sheet has assets, liabilities, and capital, where: Assets = liabilities + capital. The Fed’s capital is limited by Congress, and it changes only in small ways. But its assets and liabilities change massively.
On the asset side of the balance sheet, QT is proceeding at a record pace; the Fed has shed $867 billion in assets since the peak, now down to $8.099 trillion.

On the liabilities-and-capital side, the Fed has shed $868 billion in liabilities since the peak in April, now down to $8.056 trillion; and it increased its capital by $1 billion to $43 billion.

But there have also been massive shifts between liabilities, with some rising and others falling that we’ll get to in a moment.
The four major liabilities:

1. RRPs (discussed above)
2. Reserves
3. Currency in circulation (paper dollars)
4. Treasury General Account (TGA), the government checking account.

https://wolfstreet.com/wp-content/up...9-16-total.png

Reserves: $3.33 trillion, -$940 billion since Dec 2021 peak. But +$337 billion since the March bank panic.

Reserves are cash that banks put on deposit at the Fed, and are a form of instant liquidity in the banking system. Reserves are a liability on the Fed’s balance sheet because the Fed borrowed this cash from the banks. Since the rate hike in July, the Fed pays banks 5.4% in interest on their reserve balances.

Banks, on their own balance sheets, don’t call them “reserves,” but “interest-earning cash,” or similar. They’re assets for the banks. They use their reserve accounts at the Fed to transfer cash between banks, to do business with the Fed, to have liquid cash available when needed, and to earn 5.4% interest.

Reserves have risen since the bank panic in March, after falling sharply for the prior 15 months.

QT is draining liquidity from the financial system, and reserves are one place where the drainage showed up. But the March bank panic – Silvergate Capital, Silicon Valley Bank, Signature Bank, and First Republic toppled – caused banks to increase their liquidity, and they put some of this cash on deposit at the Fed as reserves.

QE ended in March 2022. QT started in July 2022. Note the sharp drop in reserves from December 2021 until the March 2023 bank panic, and then cash started flowing back into reserves:
https://wolfstreet.com/wp-content/up...6-reserves.png

Reserves plus RRPs: $5.17 trillion; -$1.01 trillion from Dec 2021 peak.
Since there are big shifts of cash between reserves and RRPs via the MMFs, it makes conceptual sense to look at them together to see the combined amount of liquidity that is getting drained out of the financial system via QT.

The pandemic-era QE had inflated the combined total of Reserves plus RRPs by $4.2 trillion, to $6.18 trillion in December 2021.
Since that peak, the combined balance of RRPs and reserves has dropped by $1.01 trillion, or by 16%, to $5.17 trillion
https://wolfstreet.com/wp-content/up...s-reserves.png

Currency in circulation dipped to $2.33 trillion.
Currency in circulation reflects the paper dollars in wallets, under mattresses, and in safes in the US and globally. Various studies show that the majority is overseas.

The amount of currency in circulation is demand-based through the US banking system. If customers demand paper dollars, the banking system must have enough on hand. Foreign banks have relationships with US banks to get dollars for their customers.

These “Federal Reserve Notes,” as they’re called, are a liability for the Fed. Banks get those paper dollars from the Fed in exchange for collateral, such as Treasury securities, which are assets on the Fed’s balance sheet.

That’s one reason why the Fed’s assets increase when there is no QE and no QT: demand for currency must be met by banks, and in return banks must post collateral at the Fed for those amounts, which are assets for the Fed, and its assets rise in part with the rise of currency in circulation.
Before QE, currency in circulation was the primary driver of the increase in assets on the Fed’s balance sheet through the collateral (Treasury securities, etc.) that banks have to post to get these paper dollars.

Currency as payment methods for legitimate purchases is increasingly being replaced by electronic payment systems (credit cards, debit cards, ACH, Zelle, PayPal, etc.). But demand for currency was huge during the pandemic. When there is fear of a crisis, demand for paper dollars surges: before Y2K, after the Lehman bankruptcy, and massively starting in early 2020.

Demand for currency in circulation has now stabilized, as some people return their paper dollars to the bank to then earn 5% interest on their electronic dollars.

Since the peak in early June, currency in circulation has dipped by $14 billion, to $2.33 trillion.
https://wolfstreet.com/wp-content/up...irculation.png

Treasury General Account (TGA): $537 billion.
The Treasury Department is unleashing a tsunami of new Treasury notes and bonds to fund the government deficits and to raise the balance of the TGA account, the Treasury Department’s checking account a the Fed.

The amount in the TGA account is a liability for the Fed – money that the Fed owes the government.

The Treasury Department said that it wants to end Q3 with $750 billion in the TGA. September 15 was the day estimated taxes were due, and so over the next two weeks, those tax receipts will show up in the TGA and push up the balance. As of the Fed’s balance sheet on Thursday, the amount in the TGA was $537 billion.
https://wolfstreet.com/wp-content/up...TGA-weekly.png

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https://wolfstreet.com/2023/09/11/in...r-term-yields/

Investment-Grade Corporate Giants Suddenly Sell Huge Amounts of Debt to Front-Run even Higher Long-Term Yields
by Wolf Richter • Sep 11, 2023 •

Corporate issuance further pressures longer-term Treasury yields, amid expectations of bad inflation “surprises.” Share buybacks getting a lot more expensive, but no problem either.

By Wolf Richter for WOLF STREET.
Why would corporate giants suddenly pile into the corporate bond market with large-scale new issuance in September at these high interest rates? Why not wait for that Fed pivot and rate cuts that must be coming any moment, no?

Because they want to lock in these interest rates that they can still get, before rates rise even further. These companies are not betting on rate cuts. A year ago, they bet on rate cuts that didn’t come. Now they bet on higher for longer – on higher inflation and higher long-term interest rates for longer – and they’re issuing bonds at a red-hot pace in September before rates go even higher.

Today’s shining example is T-Mobile US [TMUS] which announced that its wholly-owned subsidiary T-Mobile USA, plans to sell a pile of new debt, with the amounts and rates still left blank in the filing. According to sources cited by Bloomberg, the senior unsecured notes would amount to $2 billion, including unsecured senior notes with 10-year and 30-year terms.

The 30-year notes, due in 2054, are expected to price at about 1.63 percentage points above Treasury securities, according to Bloomberg, citing sources familiar with the deal. A spread of 1.63 percentage points would price the bonds at a yield of around 6%!

A survey of investment bankers who underwrite corporate debt sales forecast $120 billion of US debt to be issued in September, according to Bloomberg.

That would be about 34% higher than in September 2022, when $89 billion in investment grade debt was issued, according to SIFMA (Securities Industry and Financial Markets Association).
Today’s 10-year Treasury yield, at 4.30%, is a full percentage point higher than last year’s at this time. But it’s at these much higher yields this September that debt issuance is taking off.

On Tuesday after the Labor Day weekend, at least 20 investment-grade companies sold over $36 billion in new debt in the US, the biggest day this year, ahead of May 16 ($33 billion) and January 3 ($34 billion), according to Bloomberg.

Companies that issued bonds in the US after Labor Day included big deals by BHP Billiton with $4.75 billion of senior unsecured notes in a five-part deal, including 30-year notes; and Philip Morris International with $2.35 billion of senior unsecured notes, whose longest-dated portion were 10-year notes.

And in September 2022, there was hesitation by companies in issuing new debt as everyone was waiting for the Fed to slash rates again. Today, this scenario appears to be on the back burner, and companies are locking in the rates they can get now for the long term, including for 30 years.
“I would expect companies to be trying to get ahead of any economic data that sends US Treasury yields higher,” Winnie Cisar, global head of credit strategy at CreditSights, told Bloomberg. “I think we will see a front-loaded issuance month.”

All eyes are on the upcoming CPI report on Wednesday, and everyone knows it’s going to be a bad “surprise,” with more bad inflation surprises to be followed later in the year. We’ve outlined these coming second-half “surprises” back in August and in July: The base effect, energy prices that bounced off the steep plunge, and the end of the ridiculous 12-month-long adjustments to health insurance CPI, in addition to other elements that add heat to the inflation numbers. And the core services PCE price index, which the Fed keeps a close eye on, has already shot higher. Those inflation “surprises” could drive Treasury yields higher.

So now is a good time to sell lots of debt to front-run the risk of even higher rates later? Even if the Fed maintains its short-term policy rates, long-term yields will be under pressure from the tsunami of issuance by the Treasury Department, the pileup of corporate bond issuance, and this scenario that inflation and long-term yields will be higher for much longer.

T-Mobile joined the crowd, locking in the current rates before they go even higher. The company had $6.6 billion in cash at the end of June, and $76 billion in short and long-term debt.

Moody’s today rated the unsecured notes Baa2, which is in the lower segment of investment grade, two notches above junk (my cheat sheet of corporate bond credit ratings).

Fitch today rated the notes BBB+, three notches above junk, and expects EBITDA (earnings before interest, taxes, depreciation, and amortization) – a measure of cash flow – to increase “to more than $30 billion by 2024 which offsets increased debt due to spectrum acquisitions and share repurchases.”

The company said in the filing that it intends to use the net proceeds from the debt sale “for general corporate purposes, which may include among other things, share repurchases, any dividends declared by Parent’s Board of Directors, and refinancing of existing indebtedness on an ongoing basis.” It’s also expanding its 5G network.

In July last year, T-Mobile, which had long been junk-rated, was anointed with a first investment-grade rating, and by August all three major US ratings agencies rated it investment grade, and has been upgraded since then. In terms of taking on debt, the investment-grade rating was manna from heaven.

The company is a relative newcomer to share buybacks, but now as an investment-grade company, it’s massively into it. It started in Q3 2022. Over the past four quarters through Q2, 2023, T-Mobile blew $11.2 billion in cash on share buybacks. In September 2022, the company had authorized $14 billion in share repurchases through Q4, 2023. Last week it announced an additional $19 billion in a “shareholder return program,” including dividends. And this program could reach up to $60 billion, depending on additional authorizations by 2025.

And now it’s borrowing at rates at up to 6% to buy back its own shares. This follows a pile of debt issuances in May, when it sold $3.5 billion in new debt. A $1.25 billion portion of this debt were 30-year notes, due in 2054, that were priced at a yield of 5.75%. Rising interest rates no problem.

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A great summary of the Shanghai Gold Exchange (SGEI) now competing and probably replacing the COMEX and the LBMA for #gold price discovery, also the main vehicle of de-dollarization by the BRICS+ through the already trading #gold convertible #PetroYuan oil contract.

Many Western investors are dismissing the fact that #gold is already being used in global trade settlement for #oil, and by default displacing the #Petrodollar that has been the glue of the debt based monetary system the world has been working under since President Nixon launched the FIAT currency system in 1973.

Below you will find a cautionary warning from the fall of 2017 by the Chairman of the COMEX about how "people are dismissing some of these events until one day we will see a huge move", the SGEI was setup in 2014 and the #PetroYuan started trading in 2018 but yet in the West #gold became a #PetRock.
https://media.licdn.com/dms/image/sy...f41yI4Y1LB-9I0
The Shanghai International Gold Exchange and Its Role in De-Dollarization
gainesvillecoins.com • 9 min read

This article is a primer on the Chinese gold market, more specifically the Shanghai International Gold Exchange (SGEI). The SGEI facilitates “offshore” gold trading in renminbi and can play a crucial role in de-dollarization, as it allows countries to use renminbi as a trade currency that can be converted into gold without affecting China’s balance of payments. De-dollarization can be accomplished by using yuan to settle international trade and store surpluses in gold through the SGEI.
https://cdn-img.gainesvillecoins.com...rf-6367753.jpg

Chinese Yuan, Gold, and De-Dollarization

Introduction
In the Chinese gold market two circuits can be distinguished. Simplified, there is gold trading in the domestic market and in Free Trade Zones (FTZs). The domestic market is separated from FTZs and the rest of the world by the Chinese central bank, the People’s Bank of China (PBoC), that controls import into and export from the domestic market. Gold import and export between FTZs and the rest of the world is not regulated by the PBoC. The SGEI is located in the Shanghai Free Trade Zone (SFTZ) to spur international gold trading in renminbi.

The Chinese Domestic Gold Market
Let’s first examine the Chinese domestic gold market with the Shanghai Gold Exchange (SGE) at its core before we discuss the ins and outs of the SGEI.

Prior to 2002 the PBoC was the primary dealer in the Chinese gold market. With the launch of the Shanghai Gold Exchange (SGE) in 2002 the market was slowly liberalized and took over price setting and gold allocation from the central bank. By 2007 liberalization was completed as by then most wholesale supply and demand flowed through the SGE.

Laws and tax incentives funnel most supply—mine output, imports, and recycled gold—towards the SGE, which for liquidity reasons automatically attracts most demand. The SGE has its own chain of integrity, meaning only certified refineries can load-in gold bars into SGE vaults. To guarantee all metal in the SGE vaulting system is of the right quality, bars withdrawn from the vaults are not allowed to re-enter before having been remelted by a certified refiner. Every month the SGE publishes the tonnage of gold withdrawn from its vaults, which can be interpreted as wholesale demand.

From the SGE rulebook:
gold bullion will no longer be accepted into any [SGE] Certified Vault once it has been withdrawn by a member or customer.

Import into and export from the domestic market is referred to as "general trade," and in the case of gold it’s controlled by the PBoC. Twenty or so enterprises are authorized to import and export standard gold*, but for every batch they need a new License by the PBoC. Because the Chinese government has a policy of storing gold among the people to strengthen China’s economic security, imports are usually not restricted, as opposed to exports that are more or less prohibited. Panda Coins, for example, will be allowed to be exported from the domestic market, but that’s about it.

Since 2004 jewelry fabricators and alike located in mainland China can sell their products abroad though "processing trade." For processing trade no PBoC License is required; under this framework enterprises can freely import into and export gold from FTZs. A fabricator can import raw materials into a FTZ, manufacture products, and export the finished goods. Needless to say, any entity wanting to import gold from a FTZ into the domestic market needs approval by the PBoC.

https://cdn-img.gainesvillecoins.com...old-market.png

Cross-border trade in the Chinese gold market.

The Shanghai International Gold Exchange
To slowly open up China’s financial markets, enhance the connection between the international gold market and the Chinese domestic market, and push renminbi internationalization the SGEI was launched in 2014 in the SFTZ. The SGE is often referred to as the Main Board (MB) and the SGEI as the International Board (IB). The SGEI is fully owned by the SGE (the Exchange hereafter).

Both foreign and Chinese residents can trade MB as well as IB gold contracts on the Exchange. Though, foreigners can only load-in and load-out gold into and from IB vaults in the SFTZ, while Chinese residents can only load-in and load-out gold into and from MB vaults in the domestic market. The exception is that those eligible to import gold under general trade may sell gold located in IB vaults into the domestic market**. Below is an overview of what privileges which traders have with respect to MB and IB contracts.

https://cdn-img.gainesvillecoins.com...priviliges.png

The product codes are the contract names. This overview is from a few years ago (source: Spot Trading Rules of the Shanghai Gold Exchange). I can’t find an update of this overview on the website of the Exchange, but I don’t think the essence has changed.

Foreigners and Chinese residents can thus add liquidity to MB and IB contracts but can only physically move metal on their own side of the fence. As a result, neither will trade gold on the other side for reasons other than making markets, arbitrage, and speculation. Chinese long-term investors, in example, are not likely to buy metal in the SFTZ as they can’t withdraw that metal. Foreigners wanting to withdraw and repatriate will trade IB contracts.

Another feature of the Exchange is that it commingles onshore and offshore renminbi, providing a platform for arbitrage between the two.
China’s Balance of Payments, Cross-border Trade Statistics, and SGE Withdrawals

To understand everything related to the SGEI, we need to drill a little deeper into international trade. What is often misunderstood is that a country’s current account—part of its Balance of Payments, BOP—is not a reflection of goods and services crossing its border. Current accounts register the value of goods and services exchanged between domestic and foreign residents, wherever these residents are located. Cross-border trade statistics

(International Merchandise Trade Statistics, IMTS), on the other hand, record the value of goods physically being moved across borders irrespective of the buyer and seller’s nationalities.

Should a European bullion bank ship gold from London to an SGEI vault in the SFTZ, this will show up in global IMTS but doesn’t affect China’s BOP. When this batch is bought by an Indian investor, withdrawn from an SGEI vault, and exported to a designation of the owners’ discretion, the trade has circumvented China’s current account although it was settled with yuan. To be clear, for IMTS data it’s irrelevant if goods are shipped into a FTZ or the domestic market, as long as it crosses an international border an import and export are recognized.

Now we have reached a basic understanding of the SGEI, we need to examine a few additional elements to complete our analysis. Regarding IMTS figures, only non-monetary gold movements across borders are recorded. Monetary gold, which is metal owned by a monetary authority such as a central bank, is exempt from being reported in IMTS. From the United Nations IMTS rulebook:

Since monetary gold is treated as a financial asset rather than a good, transactions pertaining to it should be excluded from international merchandise trade statistics.

We could be misled when reviewing Chinese net import, in example, if a bank imports gold into the SFTZ, which is then bought by the central bank of Saudi Arabia (SAMA) on the SGEI, and then invisibly exported as monetary gold. The moment SAMA buys non-monetary gold, the metal is monetized—as prescribed by the IMF—and is subsequently eclipsed from cross-border trade statistics. This is how central banks move gold across the globe under the radar. IMTS would display the non-monetary gold import into China but not the monetary gold export, leading to an overstatement of Chinese net import. The reverse is also true: a central bank shipping monetary gold to the SFTZ would be invisible until it is bought by the private sector and de-monetized.

In final, the Exchange discloses an aggregate number for the monthly weight of gold withdrawn from SGE and SGEI vaults combined. At the surface, this number is difficult to put into perspective. Total load-out volume could all end up in the domestic market—being a useful reflection of Chinese wholesale demand—or a chunk of it is exported as (non-)monetary gold from the SFTZ. Luckily, I have insider knowledge from a source at the SGEI.

In 2015, this person told me that virtually all IB trading was done by Chinese banks for importing gold into the domestic market. More recently he wrote me that little gold withdrawn from IB vaults is exported abroad. Total withdrawals thus mainly relate to Chinese demand.

Conclusion
As demonstrated, gold trading in renminbi on the SGEI can be compared to offshore gold trading in the London Bullion Market with US dollars. As such, the SGEI is part of China’s ambitions to internationalize the renminbi to the detriment of the dollar.

Many commentators in the financial blogosphere state China’s closed capital account is holding back the offshore renminbi market from competing with the Eurodollar (offshore dollar) market. True, though PBoC swap lines promote the international use of renminbi, and as Zoltan Pozsar noted in the In Gold We Trust 2023 report: “China has a swap line with everybody.” With which he meant thirty-two counterparties.

https://cdn-img.gainesvillecoins.com...swap-lines.png

PBoC swap lines, courtesy Council on Foreign Relations.

Confirming what we have discussed is a speech by Teng Wei, Deputy General Manager of the Shanghai International Gold Exchange, from 2016:
The international board uses renminbi for pricing and settlement, which effectively connects the onshore and offshore renminbi market …. It also provides a new channel for the return of funds, which is a useful exploration for expanding the cross-border flow of renminbi and steadily promoting the internationalization of renminbi.
…

The journey of the Shanghai International Gold Exchange will epitomize the opening of China’s financial markets to the outside world and play an important part in the internationalization of the renminbi. With Shanghai becoming the third most important market in the world after London and New York, the Chinese gold market will make a great contribution to the internationalization of the renminbi.

Renminbi reserve currency status is still far away because yuan held overseas can’t freely be invested in Chinese assets such as bonds and other securities due to China’s closed capital account. Renminbi can, however, be converted into gold without limits.

Last month Russian news outlet TASS reported the BRICS nations are working on a common currency for international payments. “The idea of creating a common currency, although I would probably call it a payment unit inside BRICS countries, is floating around and is being discussed. We also have proposals about using digital financial assets supported by real assets, for example gold stable coins," Russia’s Finance Minister Anton Siluanov said.

These gold stable coins are most likely to represent gold held in SGEI vaults, Moscow, or other cities in Brazil, South-Africa, or India. Time will tell if the BRICS will materialize this new payment system that incorporates gold, and if the SGEI will be used more by international players.

Appendix
* In China standard gold must be a bar or ingot weighing 50g, 100g, 1Kg, 3Kg or 12.5Kg, with a minimum fineness of 995.0, 999.0, 999.5, or 999.9 parts per thousand.

** Technically, an enterprise eligible for import may load-in metal into IB vaults and sell these metals as deliverable on the MB, provided it has a PBoC License. When the buyer wants to withdraw this gold, the Exchange will make sure it will be loaded out from a vault in the domestic market. That is the easy way of explaining it. For the exact rules please read the Detailed Delivery Rules of Shanghai Gold Exchange:
The Exchange has established a network of Certified Vaults to facilitate physical delivery through the Exchange as well as bullion storage and other transactions by members and customers. Certified Vaults are classified into Main Board Certified Vaults (the MB Certified Vaults) and International Board Certified Vaults (the IB Certified Vaults).

MB Certified Vaults provide bullion storage, load-in and load-out services to Domestic Members and Domestic Customers. IB Certified Vaults provide bullion storage, load-in and load-out services to International Members, International Customers, and any Domestic Members and Domestic Customers who are qualified to import and export gold [have a PBoC License], as well as in acting as their agent in making customs declarations for bullion to be transported into or out of bonded zones [FTZs]. IB Certified Vaults shall accept the supervision of the customs authorities of China.
…
Authorized International Members and International Customers may deposit International Board bullion into IB Certified Vaults and, subject to relevant approved quota [PBoC License], may deposit Main Board bullion into IB Certified Vaults. No International Member or International Customer is permitted to deposit bullion into MB Certified Vaults.

WWW.AVIELFOREXLEARNINGEDGE.COM

About
I started trading currencies during 2003 with a demo account of $100,000 US with Saxo Bank.

After only demo trading until March 9, 2006 I made my first real forex trade at Trade Freedom in Montreal.

My first client under LPOA deposited $10,000 US and on May 4, 2006 deposited another $15,000 US. By June 9 I had increased the total funds to just over $50,000 US.

I traded for 6 associates at Trade Freedom and in the 3 months that I traded Forex there before taking my business over to MF Global I NEVER had one losing trade.

My first loss trading Forex came during June 2006 and it was for $200 US and it was the Most Important LOSS that I took in my Forex business.

The reason is that my Common Sense WON over my EGO.

I am a Fundamental Forex Trader and Teacher that uses MONEY FLOW as my EDGE.

Risk Management is the most important factor in being one of the few Traders whether Retail or Institutional that make it to the 5 percent group of winning Forex traders.

The control of your emotions is essential to being a successful trader whether Equities, Commodities or Forex. Fear, Greed and Ego must be dealt with in order to be a profitable currency trader.

You also need to understand that a good trade plan and knowledge of technicals and fundamentals are all required to WIN in Forex.

My method achieves a Return of 10 percent ROI monthly. Results are available to people that are known to myself as I do not deal with the public.I started trading currencies during 2003 with a demo account of $100,000 US with Saxo Bank. After only demo trading until March 9, 2006 I made my first real forex trade at Trade Freedom in Montreal. My first client under LPOA deposited $10,000 US and on May 4, 2006 deposited another $15,000 US. By June 9 I had increased the total funds to just over $50,000 US. I traded for 6 associates at Trade Freedom and in the 3 months that I traded Forex there before taking my business over to MF Global I NEVER had one losing trade.

My first loss trading Forex came during June 2006 and it was for $100 US and it was the Most Important LOSS that I took in my Forex business. The reason is that my Common Sense WON over my EGO. I am a Fundamental Forex Trader and Teacher that uses MONEY FLOW as my EDGE. Risk Managemt is the most important factor in being one of the few Traders whether Retail or Institutional that make it to the 5 percent group of winning Forex traders. The control of your emotions is essential to being a successful trader whether Equities, Commodities or Forex. Fear, Greed and Ego must be dealt with in order to be a profitable currency trader. You also need to understand that a good trade plan and knowledge of technicals and fundamentals are all required to WIN in Forex. My method achieves a Return of 10 percent ROI monthly. Results are available to people that are known to myself as I do not deal with the public.

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Jaime CarrascoJaime Carrasco• Following• FollowingSenior Investment Advisor & Senior Portfolio ManagerSenior Investment Advisor & Senior Portfolio Manager

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A contrarian Financial Advisor prepares clients for what others fail to see.

Great to see others realizing how cheap the producers of #gold and #silver are trading at, a historical low to the price of the commodity because 99.5% of Western investors have fully neglected the sector.

Fairly sure that will quickly change as the money flows change because the 70s and 80s show is replaying;



1. Rising bond yields due to rising inflation means that the bond market is no longer a safe haven.

2. Inverted yield curve means that Central Bank and the banking sector will continue loosing money putting cash in danger.

3. The stock market is at an overvalued valuations of dividend yield vs bond yields.

4. Global de-dollarization has taken flight putting further pressure on bond yields and replacing the #Petrodollar vs #gold in global trade settlement.

5. With cash, bonds, and the equity markets under pressure #gold and #silver are the last sector standing.

Seems #gold #silver and the precious metals sector's Golden Days are dead ahead because unlike the 70% debt to gdp of the 80s, today the FIAT based debt bubble just beginning to deflate was allowed to grow to 139% debt to gdp, and yet only 0.5% of Western money is currently positioned to swim with the current.

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GOLD: BUY & Forget About It | Bob Thompson

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