PM End of Week Market Commentary - 8/10/2018

davefairtex
By davefairtex on Sun, Aug 12, 2018 - 5:21am

On Friday, gold edged down -0.80 [-0.07%] to 1219.81 on very heavy volume, while silver dropped -0.14 [-0.91%] to 15.31 on very heavy volume also. Friday's moves were all about currency; the Euro plunged -0.96% to 114.18 which sent the buck up +0.91% to 96.22, which was a very large move. Money fled Europe and emerging markets for the US as Turkey's bond and currency crisis finally exploded. The Lira plunged 25.9% on the week.  25.9%!!!

What does that mean?  It means that confidence in the Lira finally snapped this week, and any remaining holders of TRY capitulated, panicking out of the currency for literally anything else they could buy. Turkey's central bank currently has its benchmark interest rate at 17.75%, but once confidence snapped, that rate just didn't matter. People fled the currency for gold, for dollars, literally for anything other than TRY. Yes, Erdogan kept rates artificially low to encourage growth, and this led to serious inflation (due to private bank money printing from all that new debt), but the huge moves this week was all about confidence, not about rates or inflation.

Armstrong predicts that a similar scenario will play out in the Eurozone - but bonds will be the vehicle rather than the currency. Once the ECB stops buying debt, bond prices in certain countries will tank, because the ECB has destroyed the bond market in Europe.  To a lesser degree, money will flee the Euro, mostly into USD.  Like Turkey, the move will require some event to smash confidence in the currency and/or the debt. Presumably for that collapse in confidence to happen, there would have to be some sort of existential crisis for the Euro. What causes that is anyone's guess, but the moves in the bond market will be quite violent – similar to what we're seeing right now in Turkey's currency market. That's his prediction anyway.

The metals sector map showed no recovery from its downtrend this week – except for gold in Euros, which popped sharply above its 9 MA. This makes it clear that all of the losses in the metals this week was just about currency movements. Gold led silver, and the miners trailed the metal. That's bearish. However the losses in the metals weren't particularly heavy.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Gold/Euro $GOLD:$XEU 0.93% -3.37% rising falling falling falling ema9 on 2018-08-08 2018-08-10
Gold $GOLD -0.22% -5.64% falling falling falling falling ema9 on 2018-08-01 2018-08-10
Copper $COPPER -0.29% -5.44% falling falling falling falling ema9 on 2018-08-10 2018-08-10
Palladium $PALL -0.46% 0.29% falling falling falling falling ema9 on 2018-08-01 2018-08-10
Platinum $PLAT -0.47% -15.94% falling falling falling falling ema9 on 2018-08-10 2018-08-10
Silver $SILVER -0.71% -10.49% falling falling falling falling ema9 on 2018-08-10 2018-08-10
Silver Miners SIL -2.61% -21.82% falling falling falling falling ema9 on 2018-07-26 2018-08-10
Junior Miners GDXJ -2.73% -8.19% falling falling falling falling ema9 on 2018-07-26 2018-08-10
Senior Miners GDX -2.84% -10.92% falling falling falling falling ema9 on 2018-07-26 2018-08-10

Gold fell -2.40 [-0.20%] this week, avoiding a new low, and more or less chopping sideways. This was a reasonable accomplishment, given the sharp rise in the buck over the same time period. Gold ended the week in a downtrend in all 3 timeframes, although the downtrends are continuing to slow. Gold in Euros is looking substantially better, with GC.EUR issuing a buy signal in the weekly timeframe. GG.EUR is now in an uptrend in both daily and weekly timeframes, and the monthly is approaching a reversal point too. This tells us that traders in Europe are buying gold.

I do wonder if there is any gold left available in Turkey at retail.  My guess is - probably not, given the panic this week.

The September rate-increase chances rose to 90%.

COMEX GC open interest rose +8,875 contracts this week.

The COT commercial net position rose +22k this week, which was 13k fewer shorts, and 9k new longs. The commercial short position continues to fall - commercials are ringing the cash register here at 1210l. Managed money net fell by -24k contracts, and continues to set new all-time-highs in short positions with each new week. This was mostly because of 19k new shorts, but also 5k fewer longs. The COT report is wildly bullish, especially the managed money short positions.

Silver fell -0.11 [-0.71%] on the week, closing above the 9 for a few days but unable to hold onto its gains. Silver's fairly brisk plunge on Friday was all about the large currency move in the Euro. Silver has avoided making a new low for the past 3 weeks – this has helped the forecaster to rise to near-reversal in both the daily and weekly timeframes, but we are not quite there just yet.

COMEX SI open interest rose 9,520 contracts. That's another large increase in OI – about 5%.  That's managed money, continuing to pile in short.

The COT commercial net position rose by 2k, a very minor increase. Commercial net remains at relatively high levels, consistent with a low in silver. Managed money net fell by -6k, which was 5.3k new shorts, and 743 fewer longs. That's a new all-time high for managed money shorts.

Miners fell -2.92% on the week, making a new low on Friday. You can see the new low on the weekly chart, and that the miners remain in a relatively strong downtrend, and that price is approaching the low set back in December 2016. While the miners are not collapsing, they are definitely doing substantially worse than the metal. My guess for this: the miners earnings are not great; many of them are losing money, as the price for gold and silver is less than the cost of production. Over time, that will ensure that the production of metals falls, as miners close unprofitable mines, and the unprofitable miners go out of business. It is also a signal that if you buy gold these days, you are buying it at cost of production, which is usually a fairly good entry point from the long term perspective.

GDX:$GOLD plunged -2.64%, while the GDXJ:GDX ratio rose +0.10%. That's bearish.

USD

The buck rose +0.86 [+0.90%] to 95.98, blasting through 95 resistance as a result of the crisis in Turkey. All of that move came on Friday. Overall, money fled emerging market currencies, with the losses being worst in the Turkish Lira, as mentioned earlier. Normally a rally this strong in the buck would lead to a sell-off in the metals, but since this was a safe haven move, gold held up quite well. The buck is back to a relatively strong uptrend in all 3 timeframes. If you are expecting the buck to turn into confetti any moment now, you aren't paying attention. Unless there the US suffers some major catastrophe, it will remain the reserve currency – the place that big money runs to when there is trouble elsewhere.

Gold is the safe haven for the little guy, and the reserve currency is the safe haven for Big money.  And for now, that remains the US Dollar.

US Equities/SPX

SPX fell -7.07 [-0.25%] to 2833.28, after first making a new high to 2863 on Wednesday, then selling off fairly briskly on Friday, ending the week below the 9 MA, which is a bearish sign. SPX remains in an uptrend in all 3 timeframes, but the daily is moving very close to a sell signal, ending the week at +0.03.

Looking at the sector map, we see hints of bearishness; most of the sectors have dropped below the 9 MA. Its hard to know what to make of the rest of the map; financials and tech are the leaders, and they look to be a bit weak, but not horribly so.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Telecom XTL 2.14% 7.33% rising rising rising rising ma50 on 2018-08-06 2018-08-10
Cons Discretionary XLY 0.77% 26.09% rising rising rising rising ema9 on 2018-08-03 2018-08-10
Technology XLK 0.43% 28.78% rising rising rising rising ema9 on 2018-08-02 2018-08-10
Energy XLE 0.07% 16.98% falling falling rising falling ma50 on 2018-08-08 2018-08-10
Healthcare XLV -0.20% 14.35% rising rising rising rising ema9 on 2018-08-10 2018-08-10
Homebuilders XHB -0.41% 3.66% rising rising falling rising ema9 on 2018-08-10 2018-08-10
Defense ITA -0.45% 21.52% rising rising rising falling ema9 on 2018-08-09 2018-08-10
Financials XLF -0.53% 12.65% falling rising rising rising ema9 on 2018-08-10 2018-08-10
Utilities XLU -0.58% -1.98% rising rising falling rising ema9 on 2018-08-10 2018-08-10
Industrials XLI -1.03% 10.69% falling rising rising rising ema9 on 2018-08-09 2018-08-10
Materials XLB -1.03% 9.46% falling rising falling rising ema9 on 2018-08-10 2018-08-10
REIT RWR -1.67% 1.91% rising rising rising rising ema9 on 2018-08-10 2018-08-10
Cons Staples XLP -1.93% -3.34% falling rising falling rising ma200 on 2018-08-10 2018-08-10
Gold Miners GDX -2.84% -10.92% falling falling falling falling ema9 on 2018-07-26 2018-08-10

The regional sector map has the US clearly in the lead, with Europe and Latin America doing worst. This map gives you a rough sense of where capital believes risk is the highest.  The US remains the safe haven.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
United States VTI -0.01% 17.18% rising rising rising rising ema9 on 2018-08-10 2018-08-10
Emerging Asia GMF -0.38% 5.34% falling falling falling falling ema9 on 2018-08-10 2018-08-10
Developed Asia VPL -1.48% 3.90% falling falling falling falling ema9 on 2018-08-02 2018-08-10
Europe IEV -2.43% -0.87% falling falling falling falling ma50 on 2018-08-08 2018-08-10
Eurozone EZU -3.22% -1.46% falling falling falling falling ema9 on 2018-08-01 2018-08-10
Latin America ILF -7.44% -5.69% falling falling falling rising ma50 on 2018-08-10 2018-08-10

VIX rose +1.52 to 13.16.

Gold in Other Currencies

Gold moved was mixed, rising sharply in Europe, while drifting slightly lower in the the US and Asia.  If I put TRY on this list, it would make the rest of the lines look meaningless.   Hmm...

I couldn't resist.  Gold doesn't look like a downtrend in TRY, does it?

Rates & Commodities

TLT jumped +1.21% on the week, with the gains coming Thursday and Friday as a result of the capital flight from Europe. TLT daily forecaster is showing a very strong uptrend. TY definitely confirms this, up +0.54% on the week, ending the week well above the 9 and the 50 MA. TY weekly issued a buy signal, throwing TY into an uptrend in all 3 timeframes. The 10-year treasury plunged -9.6 bp to 2.86%. So much for that move through 3%.

JNK dropped -0.17%, with the damage happening Thursday and Friday. JNK printed a swing high, and the forecaster issued a sell signal. JNK is saying risk off.

In the debt sector map, you can see that US government debt is doing best, with junk somewhere in the middle, while emerging market local currency debt getting absolutely clobbered. EMLC (emerging market – local currency debt ETF) yields 6.11%, but the loss to capital this week took out 6 months of interest payments, with almost all the losses happening on Friday.  And we're still in the good times.  The losses during a real correction would be much, much worse.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
US Gov 20+y TLT 1.21% -4.52% rising falling falling rising ma50 on 2018-08-10 2018-08-10
US Gov 7-10y IEF 0.64% -4.71% rising falling falling rising ma50 on 2018-08-10 2018-08-10
US Gov 3-7y IEI 0.34% -3.46% rising falling falling rising ma50 on 2018-08-10 2018-08-10
US Muni Junk 18y HYD 0.29% 1.29% falling falling rising falling ema9 on 2018-08-10 2018-08-10
US Muni 13y MUB 0.11% -2.10% falling falling falling rising ema9 on 2018-08-10 2018-08-10
US Corp 12y LQD -0.13% -4.08% falling falling falling rising ema9 on 2018-08-10 2018-08-10
Corp Junk USD 6y JNK -0.17% -2.37% falling rising falling rising ema9 on 2018-08-09 2018-08-10
Ex-US Gov LC 9y IGOV -0.68% -2.64% falling falling falling falling ema9 on 2018-07-26 2018-08-10
Ex-US Corp LC 9y PICB -1.34% -4.30% falling falling falling falling ema9 on 2018-07-26 2018-08-10
EM Gov USD 11y EMB -1.79% -7.31% falling falling falling falling ma50 on 2018-08-09 2018-08-10
EM Gov LC 7y EMLC -3.78% -12.52% falling falling falling falling ema9 on 2018-08-01 2018-08-10

Crude fell -0.55 [-0.82%] to 66.91, hit hard on Wednesday for reasons which remain unclear to me. It wasn't about the EIA report (crude: -1.4m, gasoline: 2.9m, distillates: 1.2m) which was just slightly bearish. The strong sell-off on Wednesday started much earlier in the day and continued well after the report release. Maybe it was all about Goldman Sachs issuing a statement about how scarce oil will be by end of year. That sort of bullish pronouncement from Goldman always seems to precede a big move lower.

On the daily chart, crude ended the week below the 9 and 50 MA lines, in a downtrend in both daily and weekly timeframes. On the weekly, crude has moved lower in 5 of the last 6 weeks, making a new low (by a few pennies) on Friday.

Physical Supply Indicators

* The GLD ETF tonnage on hand fell -8.81 tons, with 786 tons in inventory.

* ETF Discount to NAV:

 PHYS 9.76 -1.25% to NAV [increase]
 PSLV 5.54 -3.76% to NAV [increase]
 CEF 12.05 -3.55% to NAV [decrease]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows a 0.5-1% discount for gold and no premium for silver.

* Big bars premiums were: gold [1kg] 1.45% and silver [1000oz] 3.49%.

Grey Swans & Geopolitics

  • Top of the list: Turkey. If Turkey defaults on its debt, which is entirely possible, that will immediately cause losses for all sovereign bondholders, including a raft of European banks, who will be unable to pretend that the losses haven't happened - the way they do with all their other bad debt. This is the same thing that caused the banks in Cyprus to blow up – the banks in Cyprus owned Greek government debt, which eventually defaulted, and the losses from those defaults eventually took those banks down.

  • German Government/Migration: Germany concluded a deal with Spain to return migrants to Spain that that initially registered in Spain, but showed up at the German border.

  • Italy – Migration: no news.

  • China – Tariffs: China retaliated this week, imposing 25% tariffs on $16 billion in US products, but decided not to impose tariffs on its US oil imports after pleas from its refineries. China imports about 300 kbpd from the US.

  • China – Debt: An article in the Nikkei Asian Review suggests that the CNY's recent drop has more to do with concerns over the potential for China corporate debt defaults than it does with currency manipulation. Tariffs on Chinese imports to the US harm the ability of China's manufacturers to pay their debts, making defaults more likely. As a result, money flees China, causing the CNY to drop. So far, corporate defaults in China have been rising, but manageable. https://asia.nikkei.com/Opinion/China-s-bill-for-debt-binge-coming-due

  • Yield Curve Inversion: the 1-10 spread narrowed 3.68 bp to 48.3 bp.  The narrowing spread is all about the safe haven move this week.

  • US Congressional Elections, 2018. The generic ballot shows Democrats 47.6% [+6.5%] vs Republicans 41.1%. Democrat win → impeachment attempt? https://projects.fivethirtyeight.com/congress-generic-ballot-polls/

  • North Korea: while North Korea expresses its displeasure at a US demand to enforce sanctions, and criticizes “some high-level officials” within the US government for failing to live up to the spirit of the Singapore summit, a massive heat wave in North Korea has led to crop failures, potentially leading to mass starvation. The DPRK appears to want the US to lift sanctions prior to engaging in any material amount of de-nuking. https://www.npr.org/2018/08/10/637397016/north-korea-lashes-out-at-administration-officials-going-against-president-trump

  • Mueller Investigation: Paul Manafort's trial continues; apparently he lives a lavish lifestyle, and his former partner Gates (who is cooperating with Mueller) admitted to embezzling money from Manafort, and also alleges that he reported overseas income as “loans” at Manafort's direction so that Manafort didn't have to pay income taxes in the US. Mueller certainly doesn't care about any of these crimes, he just wants Manfort convicted so he'll be motivated to cough up something – anything – on Trump.

Summary

The collapse of the Turkish Lira this week led to a heavy sell-off in the Euro, a strong rise in the buck, and a similar strong rise in gold over in Europe. The big question, however, is a potential sovereign bond default by Turkey. That would blow up a number of Eurozone banks, which could lead to contagion in the European banking system – which by all accounts is a fragile, held-together-by-baling wire affair.  This is the Greek crisis redux, except the Troika can't step in here to fix the problem.

Big bar gold premiums have moved back to normal, and ETF discounts increased. There is no shortage of gold at these prices – at least according to my numbers anyway.  I wonder if there is any shortage of gold in Turkey?  I'd love information on that.  I'm betting that gold is very hard to find at retail right now, but that's just a guess.

The gold COT report shows a new record low in the managed money net position, while commercials continue to cover their gold shorts again this week. At some point gold should explode higher, the only question is when, and what will cause those commercials to flip the big switch.

It is also clear that gold right now is priced at or around production cost. Gold mining companies are having trouble making money at these prices; miner earnings were poor this quarter, and they'll be even worse next quarter given today's gold prices. That is what is driving prices of the mining shares lower. The earnings problems are caused by declining ore grades and rising energy costs. But as an individual, if you can buy something at its production cost, it is usually a pretty good deal long term, especially if the thing you are buying has a long history of strong demand, it is compact to store, and it never goes bad.

I'm not saying gold can't go lower - especially priced in USD - but again, buying gold at production cost is a good deal.  Gold in Euros...I think that's a really good deal.

Turkey was an accident waiting to happen. With a 16% inflation rate, confidence in holding the currency was bound to collapse at some point, and Trump's tariff declaration was just that last snowflake that caused the avalanche.

Europe is a very different case; there aren't the same inflation concerns – indeed, Draghi had to lower rates below 0% for years to get anyone in the private sector to borrow money. But Europe too is a balloon looking for a pin. The ECB has destroyed the bond market; the Italian 10-year rate is at 2.99% right now, which is only slightly higher than the US 10-year rate. And that's up a full 1% since the formation of the new Italian government.

Is there a level when debt reaches a point of no return? Looking back at the Greek sovereign debt crisis, I pick one particular point when the 10-year broke out, and never looked back.

We can see that same thing in Turkey in the currency. Since Greece lives inside the Euro, you won't see the crisis appear in the currency as clearly. Instead, it shows up in bond yields. With Turkey, the currency is the thing to watch. I'm guessing the point of no return occurred back in 2017, on the break above 5. There were just no more bounces – prices just moved in more or less of a straight line after the breakout.

What does this mean?

Turkey is toast.  Toast.  Its already over.  It was over 6 months ago, we just didn't notice.  Now we just have to wait to see how it plays out.  Will Erdogan sign up for an IMF "bailout" with all those austerity conditions along with the usual disaster capitalism asset-stripping regime?  Its hard to imagine him doing that.  It would mean his time in office is also over.

Those EU banks are now swinging in the breeze.  They'll need a bailout - a direct one this time, not the sneaky, hidden bailout that Greece is still paying for.  That'll go over well.  But how else to stop the contagion?  What will the EU public say, if anything?  And how will this affect the EU's migration deal with Turkey?

If you are a depositor in any of those banks, I encourage you to withdraw your deposits now.  Remember Cyprus: for quite a while there were rumblings.  Then, overnight, you couldn't withdraw your money.

First rule of trading: don't panic.  Second rule of trading: when it's time to panic, make sure you panic first.

Weekly trends (in order of strength):

Uptrend: BAA corporates, USD, SPX, Gold/Euros, 10-year treasury.

Downtrend: miners, bitcoin, crude, gold, copper, silver.

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10 Comments

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 154
All EU Banks?

Dave,
Fantastic End of Week Commentary!

Do you think all Eurozone banks are vulnerable? I'm based in Ireland and have already taken out most of my cash. How serious do you think this is? Would you leave anything in the bank?

Thanks, E

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 4 2014
Posts: 602
Talk about a nail in the coffin

The rhetoric is becoming more disheartening everyday:

For the third day running, the Turkish president urged Turks to take dollars, euros and gold kept under their pillows and convert it to lira to prop up the currency, which fell in the wake of Mr Trump saying the US would double tariffs on imports of Turkish aluminium and steel.

A correction is on its way. It is just a matter of how soon and how extensive it will be. Mr. Trump has shaken the tree and now we're going to see how many rotten apples will fall.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5530
EU banks exposed to Turkey

The 3 banks with the most exposure to Turkey:

  • BBVA
  • BNP Paribas
  • Unicredit

I wouldn't have any deposits in any of these 3.  Run, don't walk.

As for the rest of the EU banking system - it is "probably" of these things that won't happen tomorrow - but you can watch the stock price of your bank, and if it starts to do particularly poorly, that's a sign you should no longer have deposits there.

Local banks who don't deal in derivatives and have a reasonable Texas Ratio are - probably - fine.

Texas Ratio = Nonperforming Assets / (tangible equity + loan loss reserves)

Here's the texas ratios of the top 100 banks in the US (I know, you aren't in the US...but still it was a fun chart):

http://www.bankregdata.com/allAQmet.asp?met=TXR

# Institution Symb # Emp Total Assets Tang Eq+LLR Adj NPAs Ratio
42 Popular BPOP 7,356 47,224,563,000 5,282,385,000 2,158,964,000 40.87
70 Sallie Mae Bank   1,674 24,054,263,000 2,935,513,000 1,077,871,000 36.72
29 Discover Financial Services DFS 12,649 101,278,129,000 13,580,817,000 2,747,403,000 20.23
62 Hancock Whitney Bank HWC 3,694 27,844,612,000 2,342,562,000 404,010,000 17.25
14 SunTrust Bank STI 21,481 202,064,278,000 19,815,546,000 3,211,532,000 16.21
41 E*TRADE Bank ETFC 231 49,117,596,000 3,377,264,000 458,165,000 13.57
32 Synchrony Bank SYF 9,865 84,487,088,000 15,679,930,000 2,027,820,000 12.93
64 Webster Bank WBS 3,367 27,044,965,000 2,215,485,000 283,148,000 12.78
28 The Huntington National Bank HBAN 15,056 105,292,183,000 10,145,995,000 1,257,807,000 12.40
59 Valley National Bank VLY 3,332 30,138,784,000 2,442,214,000 302,904,000 12.40
50 TIAA Bank EVER 3,413 34,447,886,000 2,958,162,000 362,629,000 12.26
24 M&T Bank Corporation MTB 16,669 121,788,758,000 11,639,184,000 1,400,626,000 12.03
89 State Farm Bank   1,919 16,967,030,000 1,951,107,000 229,492,000 11.76
100 Third Federal Savings and Loan of Clevel TFSL 1,040 13,900,244,000 1,553,522,000 178,781,000 11.51
53 Barclays Bank Delaware   3,708 32,736,361,000 5,158,420,000 581,110,000 11.27
83 Arvest Bank   5,819 18,727,731,000 1,633,205,000 180,179,000 11.03
3 Wells Fargo & Company WFC 235,727 1,693,727,947,000 154,762,618,000 16,815,078,000 10.87
47 First Tennessee Bank FHN 5,525 40,867,187,000 3,551,223,000 386,182,000 10.87
34 Banco Santander BSAC 10,443 79,645,095,000 11,489,262,000 1,244,698,000 10.83
52 Associated Bank ASB 4,825 33,604,879,000 2,833,225,000 300,878,000 10.62
5 U.S. Bank USB 72,389 453,023,045,000 41,537,157,000 4,328,176,000 10.42
7 PNC Bank PNC 53,044 368,950,936,000 31,163,752,000 3,214,619,000 10.32
17 Citizens Financial Group CFG 17,674 159,514,812,000 14,668,624,000 1,509,910,000 10.29
23 Regions Bank RF 20,257 123,635,085,000 12,723,613,000 1,302,566,000 10.24
72 TCF National Bank TCF 5,364 23,198,143,000 2,377,798,000 241,280,000 10.15
19 Fifth Third Bank FITB 18,125 138,847,391,000 15,584,086,000 1,579,574,000 10.14
31 Compass Bank BBVA 10,038 87,739,409,000 8,119,406,000 819,144,000 10.09
86 Old National Bank ONB 2,439 17,383,725,000 1,471,385,000 145,328,000 9.88
26 Bank of Montreal BMO 11,567 113,240,660,000 13,018,831,000 1,272,406,000 9.77
91 Simmons Bank SFNC 2,645 16,138,383,000 1,401,747,000 133,838,000 9.55
78 Fulton Financial Corporation FULT 2,168 20,298,972,000 2,097,476,000 199,581,000 9.52
2 Bank of America Corporation BAC 139,812 1,775,724,000,000 159,646,000,000 14,836,000,000 9.29
79 Chemical Bank CHFC 3,187 20,249,168,000 1,693,050,000 157,262,000 9.29
80 First National Bank of Omaha FINN 4,675 20,169,374,000 2,232,244,000 199,309,000 8.93
60 Iberiabank IBKC 3,270 30,037,882,000 2,694,047,000 239,615,000 8.89
82 United Bank UBSI 2,013 19,197,626,000 1,987,993,000 169,471,000 8.52
56 Sterling National Bank STL 2,037 31,402,283,000 2,842,283,000 236,941,000 8.34
25 American Express National Bank AXP 277 114,176,192,000 13,449,123,000 1,105,164,000 8.22
44 People's United Bank PBCT 5,419 44,302,248,000 3,780,708,000 307,269,000 8.13
46 CIT Bank CIT 3,275 41,664,755,000 5,063,907,000 405,311,000 8.00
96 Bank of Hope HOPE 1,504 14,869,532,000 1,767,585,000 141,471,000 8.00
49 First-Citizens Bank & Trust Company FCNCA 6,657 34,911,613,000 3,328,150,000 265,821,000 7.99
6 Capital One Financial COF 50,459 407,372,731,000 47,455,926,000 3,787,198,000 7.98
54 First National Bank of Pennsylvania FNB 4,284 32,066,932,000 2,462,481,000 189,838,000 7.71
94 MidFirst Bank   2,472 15,379,715,000 1,679,668,000 128,884,000 7.67
90 Cathay Bank CATY 1,246 16,174,710,000 1,940,978,000 141,438,000 7.29
1 JPMorgan Chase & Co. JPM 201,327 2,297,141,310,000 224,157,433,000 16,183,868,000 7.22
65 Canadian Imperial Bank of Commerce   1,676 26,638,908,000 2,591,236,000 181,512,000 7.00
20 KeyBank KEY 18,494 135,862,871,000 13,479,612,000 936,309,000 6.95
33 USAA Federal Savings Bank   7,198 82,551,971,000 8,240,522,000 559,891,000 6.79
97 First Midwest Bank FMBI 2,023 14,755,092,000 1,261,502,000 85,005,000 6.74
68 Pacific Western Bank PACW 1,810 24,500,257,000 2,452,052,000 160,561,000 6.55
51 BOKF BOKF 4,654 33,735,191,000 3,049,180,000 197,799,000 6.49
8 Toronto-Dominion Bank TD 26,207 312,226,582,000 28,860,604,000 1,850,461,000 6.41
15 HSBC Holdings PLC   4,717 178,679,613,000 22,132,529,000 1,396,181,000 6.31
55 Synovus Bank SNV 4,226 31,625,463,000 3,467,236,000 216,077,000 6.23
36 Zions Bank ZBK 10,148 66,254,848,000 7,025,127,000 433,037,000 6.16
57 BankUnited BKU 1,753 31,283,407,000 3,308,558,000 200,943,000 6.07
4 Citigroup C 165,284 1,398,144,004,000 143,788,728,000 8,716,624,000 6.06
93 Washington Federal WAFD 1,869 15,774,522,000 1,796,710,000 108,877,000 6.06
11 Branch Banking and Trust Company BBT 33,386 216,499,000,000 19,257,000,000 1,164,000,000 6.04
61 Wintrust Financial Corporation WTFC 3,582 29,521,956,000 2,937,495,000 175,553,000 5.98
85 Flagstar Bank FBC 3,682 18,070,568,000 1,783,754,000 104,632,000 5.87
88 Bank of Hawaii BOH 2,173 17,096,331,000 1,268,298,000 73,368,000 5.78
81 MB Financial Bank MBFI 3,383 19,907,489,000 2,041,044,000 117,532,000 5.76
69 Commerce Bank CBSH 4,678 24,445,813,000 2,443,809,000 133,778,000 5.47
35 Comerica Incorporated CMA 7,224 72,213,022,000 7,476,303,000 405,064,000 5.42
95 Centennial Bank HOMB 1,767 14,904,936,000 1,693,189,000 91,483,000 5.40
58 Frost Bank CFR 4,287 30,754,455,000 2,723,912,000 144,955,000 5.32
18 Ally Bank ALLY 6,926 146,896,000,000 17,129,000,000 910,000,000 5.31
22 MUFG Union Bank MTU 12,440 123,787,395,000 13,691,395,000 719,793,000 5.26
67 Investors Bank ISBC 1,964 25,355,771,000 2,942,838,000 152,915,000 5.20
27 BNP Paribas   12,284 110,036,900,000 10,000,699,000 506,176,000 5.06
71 Pinnacle Bank PNFP 2,199 23,860,234,000 2,184,553,000 97,891,000 4.48
87 BancorpSouth Bank BXS 4,366 17,228,315,000 1,564,968,000 69,482,000 4.44
43 Signature Bank SBNY 1,359 45,215,484,000 4,360,929,000 191,893,000 4.40
76 Western Alliance Bank WAL 1,796 21,411,866,000 2,286,228,000 99,848,000 4.37
98 South State Bank SSB 2,654 14,562,897,000 1,416,971,000 61,498,000 4.34
63 Texas Capital Bank TCBI 1,622 27,749,143,000 2,515,918,000 100,720,000 4.00
66 Umpqua Bank UMPQ 4,036 26,502,151,000 2,643,692,000 105,212,000 3.98
37 Silicon Valley Bank SIVB 2,580 55,073,093,000 4,355,627,000 165,757,000 3.81
77 UMB Bank UMBF 2,767 20,314,652,000 1,815,251,000 63,477,000 3.50
39 Royal Bank of Canada RY 4,810 53,062,254,000 4,418,278,000 152,976,000 3.46
48 East West Bank EWBC 2,863 38,046,408,000 3,912,575,000 133,404,000 3.41
99 City National Bank of Florida   877 14,100,092,000 1,410,507,000 46,584,000 3.30
75 Bank OZK OZK 2,466 22,220,380,000 3,018,829,000 73,083,000 2.42
92 Stifel Financial Corp. SF 206 15,885,269,000 1,160,716,000 27,632,000 2.38
73 Raymond James Bank RJF 238 22,987,118,000 2,163,733,000 48,331,000 2.23
21 The Northern Trust Company NTRS 18,030 134,656,952,000 8,867,334,000 173,395,000 1.96
84 FirstBank   2,589 18,208,771,000 1,571,197,000 27,126,000 1.73
16 Goldman Sachs Bank USA GS 1,606 177,468,000,000 26,947,000,000 415,000,000 1.54
74 Prosperity Bank PB 3,044 22,559,336,000 2,071,218,000 31,395,000 1.52
40 New York Community Bancorp NYCB 1,805 50,454,055,000 4,771,676,000 72,037,000 1.51
12 Morgan Stanley MS 1,020 208,472,000,000 21,878,000,000 195,000,000 0.89
45 Deutsche Bank Aktiengesellschaft DB 531 43,700,384,000 9,554,851,000 82,000,000 0.86
30 First Republic Bank FRC 4,242 93,851,460,000 8,391,800,000 62,488,000 0.74
9 Bank of New York Mellon Corporation BK 44,476 302,458,913,000 23,402,309,000 136,273,000 0.58
13 Charles Schwab Bank SCHW 729 207,848,000,000 14,361,000,000 32,000,000 0.22
38 UBS Bank USA UBS 382 54,066,956,000 5,788,977,000 5,666,000 0.10
10 State Street Bank and Trust Company STT 32,187 245,244,124,000 16,415,238,000 15,030,000 0.09

I'm sure if you go into your local branch, and ask your branch manager about the bank's Texas Ratio, they will be amused.  Or maybe not.  :)

Grover's picture
Grover
Status: Platinum Member (Offline)
Joined: Feb 16 2011
Posts: 867
When To Worry

Dave,

Interesting chart! In your opinion, above what Texas Ratio would you be concerned about having money in that particular bank? For instance, Bank of America has a TR of 9.29. What would you do if you had money in their bank? Does it change the prognosis if they happen to fit in the "Too Big To Fail" category?

Grover

PS - I really enjoy your market write-ups - good information presented with wit. Thanks!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5530
texas ratios & when to worry

Thanks Grover!

Boy, I don't have any stats for the Texas Ratio for banks that failed.  That would be a good number to have.  It's also political; I'm sure the rank-and-file regulators want to pull the plug sooner rather than later, but the decision of when to do that is (I'm guessing) "sensitive to politics".

Certainly, a ratio of > 100 means the bank should be taken down immediately, because if it continues to exist, it will chew through depositor (and thus FDIC reserve) money since presumably the management that made all those bad loans will just continue to do so.  That's where a large number of Italian banks are right now.

Ultimately it depends on where we are in the cycle.  I wouldn't be worried about a ratio of 10, today.  I'm at US Bank, and it has a ratio of 10 too.  20+, at this moment in the "puppies and ice cream" phase of the economy, is probably a bad sign and I'd consider switching banks.  Or at the very least, be prepared to remove your deposits when things start to turn down.  I have mine hooked up to Treasury Direct, and can suck the account dry at whatever auction comes next.

Here's another fun chart, this time from FDIC.  You can see that 2018's "0" failures looks a whole lot like 2005.  Or 2006, take your pick.  Y'all know what comes next, right?

IndyMac's Texas Ratio was 116 when the FDIC took it down in 2007.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 374
Collapse

Time for the collapse in mining shares.  With gold and silver finally caving in, we should see some robust selliing in the mining space.  AG down huge today, along with some of the big boys (and other little guys).  There's certainly no reason to own gold or silver now that there is a possibility of a banking crisis.  I've been thinking for a while that the 2015 lows (or lower) for the shares is well within the realm of possibility.  Now, it's starting to look more like a likely scenario.  Maybe will be an opportunity for some good deals once the panic out finally takes hold.  What a world we live in.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5530
pretty crazy

Yeah I have to say this move makes no sense to me.

Notice that copper is down just a tad, while gold and silver have been pounded, and platinum has been taken to the woodshed.  This makes no sense from any reaction I can imagine to this event.  I mean, really.  Why platinum?  Why did it get hit the hardest?

I've often thought, based on the correlations I've seen when constructing my models, that they pick on platinum and silver in order to hose gold - PL and SI are much smaller markets, and are thus able to be pounded with a lower cost.  Its not one of those things that happens often, but - I think its probably happening now.

Again, when constructing my models, say for gold, I often have to use platinum and silver to explain the movements of the gold price.  Without those prices, the model for gold doesn't resolve as well.

And platinum has been absolutely creamed over the past few years.  And its got a much larger open interest these days than it ever had in years past.  PL/GC ratio at all time highs.

I dunno.  Like I said, it doesn't happen every day, but it sure looks like it's happening now.  Notice that platinum is doing the worst of any of the metals group. Why?  It makes no sense to me.

If we see some large moves in open interest in my writeup, then we will have some more evidence of this.

Gold and silver continue to be sold below cost of production.  Its a good place to buy longer term.  That isn't the same thing as a floor underneath the price.

If they are hammering gold down here at 1200, that suggests they are terrified.

It will be an interesting writeup tomorrow.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 374
Miners
davefairtex wrote:

Yeah I have to say this move makes no sense to me.

Notice that copper is down just a tad, while gold and silver have been pounded, and platinum has been taken to the woodshed.  This makes no sense from any reaction I can imagine to this event.  I mean, really.  Why platinum?  Why did it get hit the hardest?

I've often thought, based on the correlations I've seen when constructing my models, that they pick on platinum and silver in order to hose gold - PL and SI are much smaller markets, and are thus able to be pounded with a lower cost.  Its not one of those things that happens often, but - I think its probably happening now.

Again, when constructing my models, say for gold, I often have to use platinum and silver to explain the movements of the gold price.  Without those prices, the model for gold doesn't resolve as well.

And platinum has been absolutely creamed over the past few years.  And its got a much larger open interest these days than it ever had in years past.  PL/GC ratio at all time highs.

I dunno.  Like I said, it doesn't happen every day, but it sure looks like it's happening now.  Notice that platinum is doing the worst of any of the metals group. Why?  It makes no sense to me.

If we see some large moves in open interest in my writeup, then we will have some more evidence of this.

Gold and silver continue to be sold below cost of production.  Its a good place to buy longer term.  That isn't the same thing as a floor underneath the price.

If they are hammering gold down here at 1200, that suggests they are terrified.

It will be an interesting writeup tomorrow.

Good points.  The action in the miners of late, particularly today, indicates to me that it could be quite a while before we see a turn-around in PMs.  I know the earnings for many of them have been sub-par, but they had been hanging in there previously.  This break-down is either a capitulatory move or indicative of troubled waters ahead.  The COT report as well as the blow-up of all these EMs (bringing contagion well within the realm of reality) should be indicative of higher PM prices.  That's is conventional wisdom.  Anyone can see the risk now to other economies as these EMs blow up.  Anyone except would-be buyers of PMs.  This seems counter to history.  Maybe we have to see something important actually dissolve first.  I don't know.  But it aint working like it's supposed to.  Maybe our expectations, based on history, are just wrong now for the new world.

phusg's picture
phusg
Status: Bronze Member (Offline)
Joined: Jul 16 2014
Posts: 44
Interesting stuff

Interesting stuff Dave and Cold Rain...

Even the FT now has an article about PM losing their safe haven bid titled 'Gold hits lowest level since March 2017 despite Turkey fallout'. Guess only dollar bonds are considered safe these days.

Radomski has an interesting analysis of long term factors for Gold and silver: https://www.sunshineprofits.com/gold-silver/free-alerts/key-factors-gold...

He called the recent drop(s) and is now talking about $890 in late-Sep - early-Oct!!! (and he's no perma-bear)

So maybe Jim Rogers was right all along that we'd see sub-$1000 gold. Not many believed him, although I'm sure that percentage has just risen ;-)

On the platinum thing I'm not sure what to think. The policy trend here in Europe is very much against Diesel because of all the nitrogen oxides (NOx) and particulate matter (PM) emissions and AFAIK that's where a large chunk of platinum goes.

Also just read an interesting comment by Hoosier on Wolfstreet.com:

China has been a principle buyer of precious metals over the last ten years. Their dollar reserves will be diminished by Trump’s new tarrifs. I suggest you hold back on buying the shiny stuff for a few months.

China has been buying gold with US dollars and now that the Yuan is coming coming under pressure they need to use those dollars to buy up Yuan to prevent their currency from exploding. So gold is not being bought and is likely being liquidated by the Chinese to stabilize their currency.
Also, every other emerging market country will be liquidating their gold to ‘buy US dollars’ due to the strengthening dollar.

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Markhemp
Status: Member (Offline)
Joined: Nov 29 2013
Posts: 20

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