Tag Archives: Gold

Investing.com — The alarm bells will be ringing in Frankfurt this week as the European Central Bank’s governing council meets with the euro back where it was 20 years ago – worth only a dollar.The last time it was this weak, one could make an argument that it was still largely an unknown quantity, struggling to fill the shoes of the mighty Deutsche Mark in global foreign exchange markets. This time, it’s because its weaknesses are only too familiar.The ECB will raise its interest rates for the first time in a decade on Thursday, having sat out the whole of the last eight years with its key rate below zero, paying banks to lend from it in a fundamental perversion of capitalism. Even after Thursday, real – that is, inflation-adjusted – interest rates will still be running at nearly -10%. A well-timed leak on Tuesday, suggesting that the bank will discuss a hike of 50 basis points rather than just the 25 guided for, appears to have averted the embarrassment of having the euro trade below a dollar: the single currency shot as high as $1.0269 in response on a burst of what analysts said was largely short-covering.And there was further good news for the euro later in the day, when Reuters cited unnamed sources as saying that Russia will probably restart flows of gas through the Nord Stream pipeline when a scheduled maintenance period ends this week. If confirmed, that would banish fears of an immediate and complete stop of deliveries to Europe’s largest economy, which has been one of the biggest drags on the euro in recent weeks.However, for the euro to hold or even extend those gains, a number of things need to happen, almost all of them outside the control of the ECB.First, there needs to be an improvement in inflation trends in the U.S. that allows the Federal Reserve to stop raising U.S. interest rates so aggressively. This is the key point in the brutally simple tale of the euro’s decline against the dollar this year: the U.S. economy is growing fast enough to withstand higher interest rates, and the Eurozone’s isn’t. While Fed officials talk of raising rates to 3.5% or more, market interest rates suggest the ECB won’t be able to go beyond 1.5%.Second, the energy crisis currently engulfing Europe needs to abate. While Russian gas supplies remain the key pressure point here, the crisis actually goes much deeper.  An acute lack of snowfall on the Alps over the winter means that rivers on all sides cannot generate the required hydropower, let alone cool France’s ageing and increasingly unreliable nuclear reactors. French electricity prices for the day-ahead hit a staggering 589 euros ($603.73) a megawatt-hour on Tuesday, a level unsustainable for any energy-intensive economy.Energy and food accounted for around half of the 8.6% annual inflation reported by Eurostat in June. While government tax cuts in Spain, Italy and elsewhere may ease that in the course of the year, they will only do so by widening budget deficits.Which brings us to point three of what’s needed to turn the euro around: The government crisis in Italy needs to be resolved.This is not impossible: Italian government crises tend to happen every 12-18 months as a rule, and they all get resolved somehow. However, this one has more riding on it than most.Financial markets want to see Mario Draghi, the ECB’s former president and a guarantor of orthodox economic policy, remain as Prime Minister. Draghi – aware that he doesn’t have a popular mandate of his own – has said he can’t continue to govern unless the populist 5 Stars Movement (M5S), which refused to give him its vote of confidence last week, returns to the coalition.M5S defected in protest at a lack of support for lower-income groups in dealing with high inflation. Draghi has so far refused to accommodate any demands for more subsidies because he needs to present a budget that will persuade the EU to approve 200 billion euros of post-pandemic recovery funds.There is no chance of that issue being resolved in time for Thursday’s ECB meeting, which will again stop President Christine Lagarde from giving too much away about the bank’s new ‘anti-fragmentation’ tool, supposed to keep bond yields from rising too much as the ECB finally begins to raise its interest rates. That’s because the tool will reportedly be conditional – depending specifically on the observance of Eurozone rules on spending and borrowing.The reality is that no one is going to win the next Italian election on promises like that, whether they take place this year or next.As such, even though the euro’s positioning looks stretched at parity, it can easily overshoot in the near term if any of the many risks around it materialize. JPMorgan (NYSE:JPM) analysts revised their target for the currency to 95c at the weekend. But for the time being, the Eurozone’s drama looks more likely to play out – yet again – in the bond markets rather than the currency ones. Continue reading →

Investing.com – Will the now-viral fist bump result in more oil for the world? Possibly in the coming weeks, says the White House. But Saudi Crown Prince Mohammed bin Salman (a.k.a. MbS), who received the fist bump from President Joe Biden, says the kingdom’s output will climb by just a million to reach 13 million barrels per day, and that only by 2027.The truth is probably somewhere in between.Biden’s awkward encounter with a man and kingdom that he had hoped to isolate for the 2018 butchering of Saudi-journalist-turned-US-resident Jamal Khashoggi  underscored the challenges for a president desperate to bring home relief from high gasoline prices. Months of painstaking behind-the-scenes work by U.S. State Department and Saudi palace officials made it happen, and each side played up the positives from Friday’s photo-op between the two men. Politically, the gambit seemed a disaster for Biden, with criticism from some of his own party faithful, led by California Democratic Senator Adam Schiff, who tweeted that “one fist bump is worth a thousand words” and this one showed “the continuing grip oil-rich autocrats have on U.S. foreign policy in the Middle East.” Khashoggi’s widow also tweeted, telling the president that “the blood of MbS’ next victim is on your hands”.But strategically, even if the Saudis raise production slightly in the coming weeks — after the additional 650,000 bpd a month that OPEC+ has already committed for July and August — it’s a win of sorts for the White House. With the Biden visit, it’s looking increasingly likely that Saudi oil policy towards the administration will not be as toxic as before. This is in spite of the president reminding MbS on Friday that he held him responsible for Khashoggi’s death, to which the monarch responded by releasing pictures of the two of them smiling and chatting. To MbS, most important was to show the world that Biden acknowledged him as the next Saudi king and that the president recognized Riyadh as holding the levers to the world’s oil. In Biden’s case, he wanted to tell MbS who he really thought he was to his face, and that he was there as a president of the American people. In that sense, both got what they wanted.The week in oil itself scored 1 for the bulls and 0 for the bears. ​​Crude prices fell as much as 7% on the week as earlier losses induced by a strong dollar offset the likelihood that Biden’s Saudi visit will not immediately lead to additional production of oil. The dollar surged to two-decade highs between Wednesday and Thursday after panic across markets that the Federal Reserve might opt for a record 100-basis point rate hike next to quell new four-decade highs in consumer prices — a threat later downplayed by the central bank’s officials.Crude’s increasing sensitivity to the dollar, Fed rate hikes and recession threats showed it was turning into a greater financial play than a commodity driven just by supply-demand.Global crude benchmark Brent Oil has fallen for five straight weeks now, losing a cumulative 17%. U.S. crude’s West Texas Intermediate, or WTI, gauge has dropped in four of those five weeks, sliding by a net 19%. The narrative in oil now is no longer about barrel deficiency alone. Over the past week, previously unasked questions about whether oil had become too pricey for consumers and needs to come down meaningfully to lower inflation have started getting investors’ attention. All these questions coincide with pump prices of US Gasoline that have also started their descent from last month’s record highs of above $5 a gallon to a national average of $4.55 last week.The average price of U.S. gasoline, all grades combined, has now dipped for the fourth week in a row, to $4.65 as of Monday, according to data from the Energy Information Administration, or EIA.In the week through July 8, gasoline consumption plunged by 9.7% to 8.73 million barrels per day, on a four-week moving average, according to EIA data. The EIA measures gasoline consumption in terms of barrels supplied to the market by refiners, blenders, etc., and not by retail sales at gas stations. This was the steepest decline yet so far this year.Some say that U.S. drivers are resorting to all kinds of tricks to put a lid on their gasoline expenditures: Drive a little less, take it easier with the gas pedal, cut out unnecessary trips, plan shorter road trips, prioritize the most fuel-efficient vehicle in the garage, use mass transit, etc. A debate now is whether a recession — which the Fed says it’s trying hard to avoid despite Deutsche Bank, JPMorgan Chase & Co. and Morgan Stanley suggesting one may be inevitable — will do more to bring oil consumption and prices down. But talk of a recession — and how badly that could impact oil — may also be overblown as the physical market for crude remains strong. While June and July have brought sweeping changes to what decides the direction in oil, new restrictions on Russian exports or a shipment blockade in Libya or Nigeria can still turn the market on its head, sending crude prices soaring.And despite the selloff in Brent and WTI, oil for near-term delivery continues to trade at a big premium to contracts for later delivery. The downward curve slope, known as backwardation, is a hallmark of a very tight physical oil market. At about $4 a barrel, the front-to-second front month backwardation is near its strongest ever. Back in July 2008, the oil time-spreads were in the opposite condition: a contango, with spot barrels at a discount to forward contracts, a sign of an oversupplied market.Liquidity in oil market futures is, meanwhile, poor, leaving them vulnerable to anyone unwinding a large position or selling forward contracts. Over the summer, several big producer-hedging deals are likely, including the annual deal used by the Mexican government to lock in prices for the following year. Wall Street banks also have large put options for 2023 — likely a sign that a big client was in the market hedging oil prices. New York-traded West Texas Intermediate, or WTI, crude posted a final trade of $97.57 per barrel on Friday, after settling the official session up $1.81, or 1.9%, at $97.59 per barrel. For the week, however, WTI was down 6.9% after plumbing a near five-month low of $90.58 on Thursday. The U.S. crude benchmark has also lost 8.1% since the start of July.London-traded Brent crude posted a final trade of $101.13 per barrel on Friday, after settling the official session up $2.19, or 2.2%, at $101.16 a barrel. The global crude benchmark fell to $95.42 in the previous session, marking a low since late February. For the week, Brent was down 5.5%, while for July it has lost 7.4%.Amid heightened volatility ahead, WTI’s sustained move away from the just-ended week’s lows of $90.58 to hold at above $92 can push it towards the Daily Middle Bollinger Band of $104.30, said Sunil Kumar Dixit, chief technical strategist at skcharting.com.“If WTI manages to break and sustain above week high of 105, the recovery can extend to the 50-Day Exponential Moving Average of $106.80 and the 100-Day Simple Moving Average of $107.40, as well as the weekly middle Bollinger Band of $108.50,” said Dixit.But he also cautioned that failure to breach $105 could resume WTI’s downward correction to $94-$92-$90.“If WTI breaks below $90, it will eases the drop to the vertical support of $88-$85-$83,” Dixit added.Gold for August delivery on New York’s Comex posted a final trade of $1,706.50 per barrel on Friday, after settling the official session down $2.20 at $1,703.60.For the week, however, August gold was down 2.2% after plumbing a 27-month low of $1,695 on Thursday.The U.S. gold benchmark has fallen for five straight weeks now, losing a cumulative 9%. Year-to-date, it is down 7%.Since the Consumer Price Index for the year to June came in on Wednesday at a new four-decade high of 9.1%, bets on rates have been volatile — with the pendulum swinging between an unprecedented increase of 100 basis points for July versus the broader consensus for a 75-basis point hike. “Risky assets have been beaten up enough and could be ready for a bounce here,” said Ed Moya, analyst at online trading platform OANDA. “The precious metal is still vulnerable to further technical selling.”Dixit of skcharting said the five-week drop in gold has taken out all key markers including the Middle Bollinger Band of $1,877 and the major moving averages 50 week EMA 1837 and 100 Week SMA 1836. “The stochastic readings for daily gold at 6/12 and weekly gold are 3/6 are extremely oversold,” Dixit said. “Thus, a short-term rebound towards at least $1,745 is a high probability.”He also said if gold manages to breakout above $1745, it could extend towards $1770-$1,800 and $1,815“As an erstwhile safe haven, gold is not out of the woods yet and its doors remain open for another break below $1,700, aiming this time for $1683-$1,666-$1,652,” Dixit added.Disclaimer: Barani Krishnan does not hold positions in the commodities and securities he writes about. 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Debate has been simmering over whether Federal Reserve policy makers will raise the fed-funds rate by three-quarters of a percentage point later this month, as they did in June, or step up their inflation-fighting campaign with a full point hike —- something that hasn’t been seen in the past 40 years.Friday’s economic data, which included somewhat improving or steady inflation expectations from the University of Michigan’s consumer survey, prompted traders to lower their expectations for a 100 basis point hike in less than two weeks. The size of the Fed’s next rate hike might be splitting hairs at this point, however, given the bigger, overwhelming issue confronting officials and financial markets: A 9.1% inflation rate for June that has yet to peak.Generally speaking, investors have been envisioning a scenario in which inflation peaks and the central bank is eventually able to back off aggressive rate hikes and avoid sinking the U.S. economy into a deep recession. Financial markets are, by nature, optimistic and have struggled to price in a more pessimistic scenario in which inflation doesn’t ease and policy makers are forced to lift rates despite the ramifications for the world’s largest economy. It’s a big reason why financial markets turned fragile a month ago, ahead of a 75 basis point rate hike by the Fed that was the biggest increase since 1994 — with Treasurys, stocks, credit and currencies all exhibiting friction or tension ahead of the June 15 decision. Fast forward to present day: Inflation data has only come in hotter, with a greater-than-expected 9.1% annual headline CPI reading for June. As of Friday, traders were pricing in a 31% chance of a 100 basis points move on July 27 — down significantly from Wednesday — and a 69% likelihood of a 75 basis point hike, according to the CME FedWatch Tool.“The problem now does not have to do with 100 basis points or 75 basis points: It’s how long inflation stays at these levels before it turns lower,” said Jim Vogel, an interest-rate strategist at FHN Financial in Memphis. “The longer this goes on, the more difficult it is to realize any upside in risk assets. There’s simply less upside, which means any round of selling becomes harder to bounce back from.”An absence of buyers and abundance of sellers is leading to gaps in bid and ask prices, and “it will be difficult for liquidity to improve given some faulty ideas in the market, such as the notion that inflation can peak or follow economic cycles when there’s a land war going on in Europe,” Vogel said via phone, referring to Russia’s invasion of Ukraine. Financial markets are fast-moving, forward-looking, and ordinarily efficient at evaluating information. Interestingly, though, they’ve had a tough time letting go of the sanguine view that inflation should subside. June’s CPI data demonstrated that inflation was broad-based, with virtually every component coming in stronger than inflation traders expected. And while many investors are counting on falling gas prices since mid-June to bring down July’s inflation print, gasoline is just one part of the equation: Gains in other categories could be enough to offset that and produce another high print. Inflation-derivatives traders have been expecting to see three more 8%-plus CPI readings for July, August and September — even after accounting for declines in gas prices and Fed rate hikes.Ahead of the Fed’s decision, “there will be dislocations across assets, there’s no other way to put it,” said John Silvia, the former chief economist at Wells Fargo Securities. The equity market is the first place those dislocations have appeared because it has been more overpriced than other asset classes, and “there aren’t enough buyers at existing prices relative to sellers.” Credit markets are also seeing some pain, while Treasurys — the most liquid market on Earth — are likely to be the last place to get hit, he said via phone. “You have a lack of liquidity in the market and gaps in bid and ask prices, and it’s not surprising to see why,” said Silvia, now founder and chief executive of Dynamic Economic Strategy in Captiva Island, Florida. “We’re getting inflation that’s so different from what the market expected, that the positions of market players are significantly out of place. The market can’t adjust to this information this quickly.”If the Fed decides to hike by 100 basis points on July 27 — taking the fed-funds rate target to between 2.5% and 2.75% from a current level between 1.5% and 1.75% — “there will be a lot of losing positions and people on the wrong side of that trade,” he said. On the other hand, a 75 basis point hike “would disappoint” on the fear that the Fed is not serious about inflation.All three major U.S. stock indexes are nursing year-to-date, double-digit losses as inflation moves higher. On Friday, Dow industrials
DJIA,
+2.15%,
S&P 500
SPX,
+1.92%
and Nasdaq Composite
COMP,
+1.79%
posted weekly losses of 0.2%, 0.9% and 1.6%, respectively, though they each finished sharply higher for the day.For the past month, bond investors have swung back and forth between selling Treasurys in anticipation of higher rates and buying them on recession fears. Ten- and 30-year Treasury yields have each dropped three of the past four weeks amid renewed interest in the safety of government debt. Long-dated Treasurys are one part of the financial market where there’s been “arguably less financial dislocation,” said economist Chris Low, Vogel’s New-York based colleague at FHN Financial, even though a deeply inverted Treasury curve supports the notion of a worsening economic outlook and markets may be stuck in a turbulent environment that lasts as long as the 2007-2009 financial crisis and recession.Investors concerned about the direction of equity markets, while looking to avoid or trim back on cash and/or bond allocations, “can still participate in the upside potential of equity market returns and cut out a predefined amount of downside risk through options strategies,” said Johan Grahn, vice president and head of ETF strategy at Allianz Investment Management in Minneapolis, which oversees $19.5 billion. “They can do this on their own, or invest in ETFs that do it for them.”Meanwhile, one of the defensive plays that bond investors can make is what David Petrosinelli, a senior trader at InspereX in New York, describes as “barbelling,” or owning securitized and government debt in the shorter and longer parts of the Treasury curve — a “tried-and-true strategy in a rising rate environment,” he told MarketWatch. Next week’s economic calendar is relatively light as Fed policy makers head into a blackout period ahead of their next meeting.Monday brings the NAHB home builders’ index for July, followed by June data on building permits and housing starts on Tuesday.The next day, a report on June existing home sales is set to be released. Thursday’s data is made up of weekly jobless claims, the Philadelphia Fed’s July manufacturing index, and leading economic indicators for June. And on Friday, S&P Global’s U.S. manufacturing and services purchasing managers’ indexes are released. Continue reading →

LONDON (Reuters) – Traditional debt crisis signs of crashing currencies, 1,000 basis point bond spreads and burned FX reserves point to a record number of developing nations now in trouble.Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse.Totting up the cost is eyewatering. Using 1,000 basis point bond spreads as a pain threshold, analysts calculate $400 billion of debt is in play. Argentina has by far the most at over $150 billion, while the next in line are Ecuador and Egypt with $40 billion-$45 billion.Crisis veterans hope many can still dodge default, especially if global markets calm and the IMF rows in with support, but these are the countries at risk.ARGENTINAThe sovereign default world record holder looks likely to add to its tally. The peso now trades at a near 50% discount in the black market, reserves are critically low and bonds trade at just 20 cents in the dollar – less than half of what they were after the country’s 2020 debt restructuring.The government doesn’t have any substantial debt to service until 2024, but it ramps up after that and concerns have crept in that powerful vice president Cristina Fernandez de Kirchner may push to renege on the International Monetary Fund. GRAPHIC: The pain has spread- https://graphics.reuters.com/MARKETS-EMERGING/mopanaqkmva/chart.png UKRAINE Russia’s invasion means Ukraine will almost certainly have to restructure its $20 billion plus of debt, heavyweight investors such as Morgan Stanley (NYSE:MS) and Amundi warn.The crunch comes in September when $1.2 billion of bond payments are due. Aid money and reserves mean Kyiv could potentially pay. But with state-run Naftogaz this week asking for a two-year debt freeze, investors suspect the government will follow suit. GRAPHIC: Ukraine bonds brace for default https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrbaxrvm/Pasted%20image%201657725996621.png TUNISIAAfrica has a cluster of countries going to the IMF but Tunisia looks one of the most at risk.A near 10% budget deficit, one of the highest public sector wage bills in the world and there are concerns that securing, or a least sticking to, an IMF programme may be tough due to President Kais Saied’s push to strengthen his grip on power and the country’s powerful, incalcitrant labour union. Tunisian bond spreads – the premium investors demand to buy the debt rather than U.S. bonds – have risen to over 2,800 basis points and along with Ukraine and El Salvador, Tunisia is on Morgan Stanley’s top three list of likely defaulters. “A deal with the International Monetary Fund becomes imperative,” Tunisia’s central bank chief Marouan Abassi has said. GRAPHIC: African bonds suffering- https://fingfx.thomsonreuters.com/gfx/mkt/zdvxobognpx/Pasted%20image%201657541934055.png GHANA Furious borrowing has seen Ghana’s debt-to-GDP ratio soar to almost 85%. Its currency, the cedi, has lost nearly a quarter of its value this year and it was already spending over half of tax revenues on debt interest payments. Inflation is also getting close to 30%. GRAPHIC: How not to spend it- https://graphics.reuters.com/MARKETS-EMERGING/znpneakgkvl/chart.png EGYPT Egypt has a near 95% debt-to-GDP ratio and has seen one of the biggest exoduses of international cash this year – some $11 billion according to JPMorgan (NYSE:JPM). Fund firm FIM Partners estimates Egypt has $100 billion of hard currency debt to pay over the next five years, including a meaty $3.3 billion bond in 2024.Cairo devalued the pound 15% and asked the IMF for help in March but bond spreads are now over 1,200 basis points and credit default swaps (CDS) – an investor tool to hedge risk – price in a 55% chance it fails on a payment. Francesc Balcells, CIO of EM debt at FIM Partners, estimates though that roughly half the $100 billion Egypt needs to pay by 2027 is to the IMF or bilateral, mainly in the Gulf. “Under normal conditions, Egypt should be able to pay,” Balcells said. GRAPHIC: Egypt’s falling foreign exchange reserves- https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxkqnpd/Pasted%20image%201657817324629.png KENYAKenya spends roughly 30% of revenues on interest payments. Its bonds have lost almost half their value and it currently has no access to capital markets – a problem with a $2 billion dollar bond coming due in 2024.On Kenya, Egypt, Tunisia and Ghana, Moody’s (NYSE:MCO) David Rogovic said: “These countries are the most vulnerable just because of the amount of debt coming due relative to reserves, and the fiscal challenges in terms of stabilising debt burdens.” GRAPHIC: Kenya’s concerns- https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnelzjvq/Pasted%20image%201657872126738.png ETHIOPIA Addis Ababa plans to be one of the first countries to get debt relief under the G20 Common Framework programme. Progress has been held up by the country’s ongoing civil war though in the meantime it continues to service its sole $1 billion international bond. GRAPHIC: Africa’s debt problems- https://fingfx.thomsonreuters.com/gfx/mkt/lbvgneokapq/Pasted%20image%201657727788029.png EL SALVADOR Making bitcoin legal tender all but closed the door to IMF hopes. Trust has fallen to the point where an $800 million bond maturing in six months trades at a 30% discount and longer-term ones at a 70% discount. PAKISTANPakistan struck a crucial IMF deal this week. The breakthrough could not be more timely, with high energy import prices pushing the country to the brink of a balance of payments crisis.Foreign currency reserves have fallen to as low as $9.8 billion, hardly enough for five weeks of imports. The Pakistani rupee has weakened to record lows. The new government needs to cut spending rapidly now as it spends 40% of its revenues on interest payments. GRAPHIC: Countries in debt distress at record high- https://fingfx.thomsonreuters.com/gfx/mkt/klpykyzxepg/Pasted%20image%201657728812497.png BELARUSWestern sanctions wrestled Russia into default last month and Belarus now facing the same tough treatment having stood with Moscow in the Ukraine campaign. GRAPHIC: Belarus bonds: https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrbzdmvm/Pasted%20image%201657848388314.png ECUADORThe Latin American country only defaulted two years ago but it has been rocked back into crisis by violent protests and an attempt to oust President Guillermo Lasso.It has lots of debt and with the government subsidising fuel and food JPMorgan has ratcheted up its public sector fiscal deficit forecast to 2.4% of GDP this year and 2.1% next year. Bond spreads have topped 1,500 bps. NIGERIABond spreads are just over 1,000 bps but Nigeria’s next $500 million bond payment in a year’s time should easily be covered by reserves which have been steadily improving since June. It does though spend almost 30% of government revenues paying interest on its debt. “I think the market is overpricing a lot of these risks,” investment firm abrdn’s head of emerging market debt, Brett Diment, said. GRAPHIC: Currency markets in 2022- https://fingfx.thomsonreuters.com/gfx/mkt/zgpomxnjrpd/Pasted%20image%201657869185784.png Continue reading →

(Bloomberg) — When FBI agents knocked on the door of his Brooklyn, New York, home in August 2018, trader John Edmonds told them he didn’t know anything about gold and silver price manipulation at JPMorgan Chase & Co. That was a lie, he admitted Thursday.Most Read from BloombergEdmonds, who worked at JPMorgan for about a decade, eventually pleaded guilty to conspiracy and commodities fraud and agreed to cooperate with prosecutors. He’s now a key government witness against his former boss, Michael Nowak, the longtime head of the precious-metals trading desk; gold trader Gregg Smith; and hedge fund salesman Jeffrey Ruffo.During two days of testimony at a criminal trial in Chicago, Edmonds described how the three senior executives routinely used “spoof” trades — huge orders that are quickly canceled before they can be executed — to push precious metals up or down from 2008 to 2016 to make trades for the bank and its clients more profitable. Edmonds said he learned how to spoof at JPMorgan.But Nowak’s defense lawyer David Meister, over several hours of cross examination Thursday, sought to undermine the credibility of Edmonds, who testified earlier that he’d committed no crimes since leaving JPMorgan in 2017.Meister questioned Edmonds about his FBI interview in 2018, and played a recording of the encounter made by the agents.“I don’t know what was going on in the market at that time,” Edmonds can be heard saying on the recording played for the jury. “Not spoofing, no manipulation. Like, that’s not what we do.”In federal court on Thursday, the former trader said he didn’t know lying to an FBI agent was a crime and regretted doing so. “I owned up to what I did, it’s what happened and the penalties are the penalties,” Edmonds said.Read More: JPMorgan Gold Desk ‘Spoofing’ Cheated Market, Ex-Trader SaysMeister also brought up comments by Edmonds under oath during a deposition he gave in a lawsuit against JPMorgan, after he’d left the bank. At the time, the former trader told federal authorities he didn’t know why one of his colleagues was fired in 2013. But on Thursday, Edmonds admitted that Nowak had told him in a meeting shortly after the firing that the former colleague had lost his job for spoofing.“You lied to the deposition, you lied to the FBI,” Meister said. “That’s two crimes committed after you left JPMorgan.”Edmonds, who has been on the witness stand since Tuesday, was hired at a salary of about $80,000 in 2008, and was earning about $300,000 annually by 2017, when he left the bank and took a severance buyout of about $157,000.On Friday, During cross-examination by Smith’s attorney, Jonathan Cogan, Edmonds admitted he also lied on his 2017 severance agreement with JPMorgan, which included a requirement that he disclose any violations of the bank’s code of conduct that he was aware of.Edmonds testified that while he signed the document saying there were no violations that he was aware of, “that was a lie.” He added that he has been telling the truth since he agreed to plead guilty and cooperate with prosecutors.Also under scrutiny was Edmonds’s trading record. Between 2009 and 2013 he averaged an annual loss of $39,000, according to data shown to the court, though he began to generate profit towards the end of that period.“Early on in my career, I lost money,” Edmonds said. “That was a learning curve,” and “over time I started to make more money, I started to get better,” he said.The annual profit of JPMorgan’s precious metals desk varied, but it never dipped below $100 million between 2007 and 2018, according to data presented by Meister. In its best year, it made more than double that.The case is US v. Smith et al, 19-cr-00669, US District Court, Northern District of Illinois (Chicago)(Updates with Friday testimony about severance package, agreement.)Most Read from Bloomberg Businessweek©2022 Bloomberg L.P. Continue reading →

‘The worst bear market in my lifetime’: Here’s why Jim Rogers thinks stocks will decline for a long time — but he also suggests 2 shockproof assets for protectionWith the S&P 500 down about 21% year-to-date, the situation for stocks is pretty grim — but according to legendary investor Jim Rogers, it’s just the start.“This has to be the worst bear market in my lifetime, which means it will go down a lot and it will last a long time,” the 79-year-old told ET Now last month.Spiking price levels present another concern. Rogers says that “most central bankers don’t know what they are doing” and “inflation will get worse.”He’s correct in that prediction, as we just learned that U.S. consumer prices increased 9.1% in June from a year ago — the fastest pace since November 1981.Rogers knows a thing or two about making money in turbulent times. He co-founded the Quantum Fund with George Soros in 1973 — right in the middle of a devastating bear market. From then till 1980, the portfolio returned 4,200%, while the S&P 500 rose 47%.If you are looking for a safe haven, Rogers says “there is no such thing as safe” in the world of investments. Still, the multimillionaire points to two assets that could help you withstand the upcoming onslaught – they also happen to be great hedges against rampant inflation.Don’t missSilverPrecious metals are a go-to choice for investors in dark times, and Rogers is a long-time advocate.“Silver is probably less dangerous than other things. Gold is probably less dangerous,” he says.Gold and silver can’t be printed out of thin air like fiat money, so they can help investors preserve wealth in inflationary periods. At the same time, their prices tend to stay resilient in times of crisis.But that doesn’t mean they are crash-proof.“I’m not buying them now, because in a big collapse, everything goes down. But I probably will buy more silver when it goes down some more.”Silver is widely used in the production of solar panels and is a critical component in many vehicles’ electrical control units. Rising industrial demand, in addition to its usefulness as a hedge, makes silver in particular a compelling asset for investors.You can buy silver coins and bars directly at your local bullion shop. You can also invest in silver ETFs like the iShares Silver Trust (SLV).Meanwhile, silver miners such as Wheaton Precious Metals (WPM), Pan American Silver (PAAS) and Coeur Mining (CDE) are also solidly positioned for a silver price boom.AgricultureYou don’t need an MBA to see the appeal of agriculture in a bear market: No matter how big the next crash is, no one is crossing “food” out of their budget.Rogers sees agriculture as a potential refuge in the upcoming collapse.“Silver and agriculture are probably the least dangerous things in the next two or three years,” he says.For a convenient way to get broad exposure to the agriculture sector, check out the Invesco DB Agriculture Fund (DBA). It tracks an index made up of futures contracts on some of the most widely traded agricultural commodities — including corn, soybeans and sugar.You can also use ETFs to tap into individual agricultural commodities. The Teucrium Wheat Fund (WEAT) and the Teucrium Corn Fund (CORN) have gained 12% and 13%, respectively, in 2022.Rogers also likes the idea of investing in farmland itself.“Unless we’re going to stop wearing clothes and eating food, agriculture is going to get better. If you really, really love it, go out there and get yourself a farm and you’ll get very, very, very rich,” he told financial advisory firm Wealthion late last year.Some real estate investment trusts specialize in owning farmland, such as Gladstone Land (LAND) and Farmland Partners (FPI).Meanwhile, new investing services allow you to invest in farmland by taking a stake in a farm of your choice. You’ll earn cash income from the leasing fees and crop sales — and any long-term appreciation on top of that.What to read nextSign up for our MoneyWise newsletter to receive a steady flow of actionable ideas from Wall Street’s top firms.US is only a few days away from an ‘absolute explosion’ on inflation — here are 3 shockproof sectors to help protect your portfolio‘There’s always a bull market somewhere’: Jim Cramer’s famous words suggest you can make money no matter what. Here are 2 powerful tailwinds to take advantage of todayThis article provides information only and should not be construed as advice. It is provided without warranty of any kind. Continue reading →

The booming recovery demonstrated we need more warehouses full of everything from laptops to garden gnomes, writes Christopher Smart.

Angela Weiss/AFP via Getty Images

About the author: Christopher Smart is chief global strategist and head of the Barings Investment Institute.

It’s like those nightmares where the bad guy stalks ever closer with a big club and you can’t scream or run. Here comes Fed Chair Jerome Powell brandishing the bluntest of instruments to deliver price stability, and all we can do is sit paralyzed and wonder how much it’s going to hurt. The only uncertainty about the next 12 months is whether the economy will be bad or very bad.

With an economic system that seems so brutal and unpredictable, is there any wonder at the rising political discontent? But there are, in fact, policies and practices that can help moderate wild inflationary swings and support the Fed’s efforts to restore stable prices more gently. Such measures may be of little assistance this time, given how the collapse in stocks already seems to be pricing in the worst, but they will limit the collateral damage from future cycles. Labor flexibility: Nimble companies are at the heart of America’s economic success, but managers are often too quick to shed workers in a downturn before scrambling to hire them back when demand returns. Selling low and buying high is the worst kind of economic stewardship, beyond the damage to operational efficiency and culture. It also clearly aggravates current inflation pressures as firms scoop up every last flight attendant, dockworker, and waiter.  In contrast, European companies kept employees attached to their jobs, paying a reduced salary with government support. American managers cringe at continental employment practices they see as heavy-handed and wasteful, but the European approach clearly worked in this crisis. Unemployment peaked much lower than in the U.S. after the onset of the pandemic and has now fallen to historical lows despite labor participation at its highest ever. Inflation also looked far more manageable, at least until the Russian invasion disrupted global commodity markets. Labor supply: With all the talk of post-pandemic retirements, America would also benefit from having more—and more flexible—workers.  Women are just now recovering their places in the workforce, having suffered disproportionately from lockdown layoffs and family care commitments. But the current 56.8% female participation rate lags countries like Canada, the United Kingdom, and Norway. It’s a complex issue, but adjustable schedules and more affordable child care would expand the supply of workers and dampen large, cyclical wage swings. Net migration, which has fallen substantially since 2016, would help, too. Not only do immigrants increase the labor supply, they are usually much more mobile and willing to move where the jobs need filling, all of which helps cool desperate bidding up of labor costs when firms get desperate.  Fiscal targeting: 2020’s shocking jobless spike also triggered huge stimulus flows to households, whether they needed them or not. Most did, but the extraordinary $2.5 trillion in excess balances sitting in U.S. bank accounts fueled a spending boom and consumer inflation unseen since the 1980s. With inflation still raging, the government is left with blunt instruments like gas tax holidays and tariff cuts that barely ease the pain while actually working against the Fed’s efforts to cool demand. Properly calibrating stimulus is hard even without a crisis, but the government needs better mechanisms for disbursing aid. This includes modernized Internal Revenue Service systems, improved means to reach those who don’t file tax returns, and faster payments plumbing. If distributed ledger technologies and digital dollars make it easier and cheaper to transfer money, disbursements can be better calibrated and reduced as recovery takes root.  Fatter inventories: Long gone are the days when business schools celebrated the virtues of “just in time” deliveries, which kept operations lean and profits high. The pandemic itself delivered a wake-up call to the risks of running out of personal protective equipment, but the booming recovery demonstrated we need more warehouses full of everything from laptops to garden gnomes. Obviously, firms can’t hold everything in stock, but they can develop more reliable supply lines to avoid the frenzied price increases for scarce items. This doesn’t mean moving all factories back to America, but it does include lining up more than one supplier and depending on more than one port of entry.  Competition policy: It’s too easy to blame corporate greed for high prices, as the Biden administration has, denouncing meat packers and oil drillers. Still, inflation has been aggravated in areas where there is less competition to keep prices low. Scholars have documented how the rise of corporate concentration in airlines, mobile telecommunications, and healthcare have driven prices higher relative to European equivalents.  Fixing this requires complex changes in law and policy to strike the right balance between consolidation that creates efficiencies and competition that keeps prices low. Even the slightest improvement on the margin, though, makes the Fed’s inflation battle that much easier.   Any adjustment that brings more flexibility to goods and services markets can help stabilize prices through cyclical swings. Any measure that alleviates the Fed’s burden also reduces the collateral damage of the adjustment in bankruptcies and joblessness. None of these reforms is automatic or easy, but without trying, we are merely bracing for the bad guy with the club. Guest commentaries like this one are written by authors outside the Barron’s and MarketWatch newsroom. They reflect the perspective and opinions of the authors. Submit commentary proposals and other feedback to ideas@barrons.com. Continue reading →