Why We"re Buying Physical Gold with a $1700 Target

Originally on marketslant.com

For What it is Worth: We are buying Gold in our small family fund. This is a trade, not an investment. Potentially a much longer term trade for us than normal, possibly a 12 month hold as opposed to our 3 day positions. We are buying physical in quantities that will not need to be sold if we are wrong, thus no leverage. We will also be swing trading gold with an upward bias as our indicators dictate below $1260 or above $1306.

Target  picking is risky in an asset whose value is largely based on sentiment and prone to being "jawboned" into its proper place. But we believe for various reasons that if Gold does not pierce $1260 spot, its chances of a rally topping between $1450 and $1700 are strong over the next 12-18 months. The wide target range reflects the emotional factor in Gold"s behavior far outweighing supply, production costs, and its lack of fundamentals to measure using tools like EBITDA, PE, and cash flows. And our own analysis is corroborated from several different disciplines from whom we did not seek out to rationalize. It"s a trade, that"s all. But it"s a very good and very rare risk reward trade. it has set up right now. Further, it will either be violently and decisively confirmed (or negated) above $1306 or below $1260.

Why are we sharing this? That same question should be asked of Ray Dalio, Jeff Gundlach and others who announce they are bullish on Gold after they have  bought. Our own position is not relevant to the market overall and we do not need to market our tiny positions to create an exit strategy a la George Soros.  The premise for the trade happens so rarely its worth writing about, if for no other reason as an exercise in outsourcing our self-discipline on the trade. 

Vince Lanci for SKG

vlanci@echobay.com 

Here is how  we came to be this way.

Step 1: Volatility is Coiling

When trading short term periods, intraday and intraweek, we use a volatility system for alerts to incipient movement. We risk 1 to make 2 and move  on when wrong. It works about 50% of the time. it is net profitable. And best of all, positions that are in limbo are closed expeditiously. This is after all a volatility system. No vol, no position. It"s been cited here many times in the past. When it is right, it is very right. when it is wrong, you are out. Past posts and a 25 year track record of use bear this out from our active days.  The bottom of this post goes into more detail on its use.

What we never did at Echobay or its predecessor fund CIS Energy, was use it on long term charts. We certainly looked at them, but only for bias in shorter term trades.  Last month we took a serious look at our VBS algorithm on a monthly chart. Here is what we found:

Updated from : Gold Macro Analysis: A November to Remember

Gold has a  tremendous risk reward setting up above $1306 or below $1260..... which way from there is not known but can be handicapped once either number is breached

for a nexplanation of VBS see bottom Appendix

Step 2: How Equity Funds Play Gold

Portfolio managers at large equity funds who have contributed here anonymously use systems that advise them when being in cash as opposed to long stocks is prudent. What is also known is that funds like these  punt gold positions with their discretionary in-house money for fun.

They use similar systems for entry and exit, and never risk much in their positions. Gold is a hobby to these guys. As a result, they like to buy and walk away with long term trade orientations and firm stops. This means using long  term moving averages to avoid noise. We know this is true.  And here is an example of how that type of positions is implemented:

 In a recent interview a vocal critic of the Gold industry explained why he was buying Gold

…Gold is poised to close above its 12-month moving average for the second straight month. Going back to 1970, the average monthly return for gold following a close above the 12-month moving average is 1.47%. The average monthly return following a close below the 12-month moving average is -0.15%.

If you used the simplest of trend-following methods, investing in gold when it was above its 12-month moving average, and going to cash when it is below, the results would have been far better than just buying and holding gold. He continues:

The chart below shows when you would have been invested in gold and when you would have been out. Granted, prior to GLD, this could only have been done with futures contracts, or gold bullion, with the former adding a degree of leverage that I would not have been comfortable with, and the latter adding a degree of paranoia that also would have made me uncomfortable.

Full post : Vocal Critic Explains Why He is Buying Gold

About Physical vs. ETF: While we agree with the rationale behind GLD vs futures if you are trading and not investing, we feel for multiple reasons the physical gold market is going to open up and become a serious competitor to ETF allocations within 12 months. Specifically, blockchain products are coming,  and if properly implemented as a pipeline, owning physical gold not held in trust by a GLD custodian will be as easy as clicking a mouse. You will buy and sell physical Gold that will be yours and verified via the blockchain system.

So for us, physical gold now has the benefit of increased  liquidity on the horizon, which means increased transactions and exposure. Which ultimately means decentralization of the Gold market from a few large firms to grass roots stackers, owners, and value preservers. We view emerging technologies as putting physical assets in a position to  have their true value unlocked. Whether that be the tea farmer in India who can"t currently get a loan on his land due to government rules, to Silver whose value is somewhat disconnected from its  price. The effect will not be unlike when a private company goes public. Accessibility and liquidity creates safety and increases demand. Owning physical metals is like owning a beneficiary of technology down the road.

Monthly Chart Through July 2017 using the 12 Month MA described above

 

Step 3: Optimizing the Simple 12 month MA Tool

by optimizing the MA with one factor we back tested greater successes when in trades. Conversely, we were also in less trades. On balance it was a wash. But right now the employed filter says the 12 Month MA has bigger upside than the average if profitable at all. A rare chance to buy close to the level the fund punters did with a statistical chance of greater profits than the  1.47% monthly average  generated by the original backtest.

Updated and Optimized by the Author

 

The chart below shows the hypothetical results from each of the 30 exits following an entry (going back to 1970). Using these rules would have resulted in a loss two-thirds of the time. But as you can see, the losses have been relatively shallow, not exceeding 10%, while the gains have been good to extraordinary.

Step 4: Using VBS for Confirmation of Direction

Simply put: If we get a VBS signal trigger when $1306 trades, a decision must be made to add, sell, or hold based on the data that comes with the signal. If we get one on a $1260 print, the same must be assessed. 

 

Step 5: Actions

1. We are buying Gold now based on the "Fund Finder" signal with a monthly stop out below the yellow line in that chart above.


2. $1306- we will consider adding a shorter term amount in a rally if the monthly VBS is triggered higher


3. $1260-  we will consider either adding physical, or selling paper Gold for swing trading purposes if the VBS is triggered lower.


4. Per #1- we will close or hedge the first physical purchased on a monthly settlement below $1244 - the wide berth on monthly exits necessitates no leverage 

 

Bonus: Moor Analytics comes to a similar conclusion from a different perspective.

Moor Analytics: Gold Downside May Finally be Exhausted

Within the overall bearishness I noted that a possible area of exhaustion for this move down from 13624 comes in at 12732-644.  We basically held this, but with a $1.6 violation, and rallied to 13084 before rolling over and rejecting from it again (although this time down the 12628 was simply support, not exhaustion)

And Michael"s most recent weekly report of Nov. 10th

Via Moor Analytics:

I would note that we broke above a well-formed macro line in the week of 8/7 that came in at 12629. The

break above here projects this upward $183 minimum, $501 (+) maximum—the maximum to be attained likely within 9-12

months. This line comes in at 12357 today. I am late to the game on this, but we were only $18 from the original breakout

when I mentioned this, and have a lot of room to go in the projection.

 

Appendix

 

What is VBS?

• Volatility Based Risk Reward Generator

+ Originally developed as an alert to when the risk of being short implied volatility is larger than being long it, and vice-versa

+ It is a probability model that handicaps risk reward

+ As a by-product of its original purpose, it gives risk/reward scenarios in market direction. 

+ Due to its accuracy in predicting volatility expansion, directional applications are right or wrong quickly and is very useful in efficient use of capital

 

How VBS Works

• Time is precious, Price is noisy, Volatility is less so.

+Volatility is less noisy than price, therefore more reliable as an indicator. 

+Volatility cycles more cleanly and  can be seen to "inhale and exhale" when viewed graphically with Bollinger Bands

+VBS is based on several relationships between historical and implied volatility  across different time frames

+ It can  be applied by traders on any time frame

 

VBS and Direction

• It doesn"t predict price, only speed of movement

+It gives non-directional alerts and was initially developed for optimizing option portfolio risk.

+While not predictive directionally, VBS gives as a by-product excellent risk-reward setups for directional plays

 

VBS Process

• Radar, Alert, Trigger, Entry, Exit

1. Radar- VBS generates 2 prices, one above and one below current prices for a "breakout" in market volatility 


2. Alert- One of the prices is breached and closes its bar/ candle beyond that price level.


3. Trigger- Real volatility will expand
   
   • Market direction does not have to continue in the direction the price in #1 was broken
   
   
   • volatility based risk- reward prices are generated for directional use. I.E. Risk 1 to make 2
   
   


4. Entry- using the  VBS risk/ reward generated levels, a decision is made to either go with the directional trend, against it, or do nothing
   
   • The trigger gives 2 bites at the apple if the trader so desires.
   
   
   • In "first way, wrong way" scenarios reversal levels are generated (N.B.- our preference is to not play the reversal and have left money on the table in favor of the trauma of being "chopped up". if compelling, we have used options to remain in the game on reversals)
   
   


5. Exit- is either from a stop-out, a profit capture, or a time limit
   
   •  Stop-Loss- are generated by VBS and adhered to religiously. Profitable trades trail stops higher based on expanding volatility
   
   
   • Profits- exits can be subjective, we prefer taking 90% of position at target and leaving a tail if the VBS is not signalling Vol is overbought
   
   
   • Time Exit- trades  that are neither profitable  nor stopped out are exited  in 3 bars/ candles. The signal is designed for quick confirmation / rejection of the trigger
   
   

Good Luck

About the Author: Vince Lanci has 27 years’ experience trading Commodity Derivatives. Retired from active trading in 2008, Vince now manages personal investments through his Echobay entity. He advises natural resource firms on market risk. He pioneered and executed the Nat Gas EOO arbitrage trade of 2006 to 2008, netting over $90MM for a NYC hedge fund before retiring. Over the years, his expertise and testimony have been requested in energy, precious metals, and derivative fraud cases. Lanci is known for his passion in identifying unfairness in market structure and uneven playing fields. He is a frequent contributor to Zerohedge and Marketslant on such topics. Vince contributes to Bloomberg and Reuters finance articles as well. He continues to lead the Soren K. Group of writers on Marketslant.

vlanci@echobay.com 

CNN Caught Faking News Again: US Intel Accuses UAE, Not Russia, Of Orchestrating Qatari "Hack"

Just over a month ago, we expressed amazement at just how sophisticated, efficient and pervasive the "Russian hacking" community had become after CNN reported - citing unnamed government officials of course - that they had managed to hack into a Qatari News Agency and post a "fake" news story all in an attempt to drive a wedge between the U.S., Qatar and some of it"s Gulf Arab neighbors, one which culminated - at least according to the CNN narrative - with the Qatari crisis in which an alliance of Arab states led by Saudi Arabia isolated and blockaded the nat gas rich nation.

The CNN headline made it quite clear: ignore the Arab conflict and please focus on the only thing that matters these days: Russia. Just in case it is somehow lost, we will have it here for posterity.

Think about that for a minute: set aside the logistics of the actual hacking event itself and consider just how good the Russians had to be to know exactly what news story needed to be planted inside the Qatari news agency to provoke an immediate severing of diplomatic ties by numerous Arab neighboring states: it truly was amazing how it all played out exactly the way the Russians planned. The conclusion: those wily "Russian hackers" are certainly not a bunch of amateurs, would come in useful as the Russian hacking narrative just refused to go away.

And while that may sound like a joke, at least to CNN it wasn"t.  Here are the details, as they were previously reported by CNN:

The FBI recently sent a team of investigators to Doha to help the Qatari government investigate the alleged hacking incident, Qatari and US government officials say.

Intelligence gathered by the US security agencies indicates that Russian hackers were behind the intrusion first reported by the Qatari government two weeks ago, US officials say. Qatar hosts one of the largest US military bases in the region.

The alleged involvement of Russian hackers intensifies concerns by US intelligence and law enforcement agencies that Russia continues to try some of the same cyber-hacking measures on US allies that intelligence agencies believe it used to meddle in the 2016 elections.

The Russian goal appears to be to cause rifts among the US and its allies. In recent months, suspected Russian cyber activities, including the use of fake news stories, have turned up amid elections in France, Germany and other countries.

As it turns out, it"s somewhat ironic that CNN accused Russia of spreading "fake news stories" that "have turned up amid elections in France, Germany and other countries" because, as CNN"s ideological twins over at the WaPo blasted moments ago, it wasn"t Russia at all (now that the hacking narrative has found a renewed vigor in the US, courtesy of the leaked Trump Jr. emails) but - wait for it - the UAE, i.e. not Russia.  Compare the CNN headline above from June 6 with what the WaPo has just published:

Here is the "latest" official narrative, at least according to the "U.S. intelligence and other officials who spoke on the condition of anonymity to discuss the sensitive matter" quoted by WaPo, who may or may not be the same ones who planted the original fake news at CNN:

The United Arab Emirates orchestrated the hacking of Qatari government news and social media sites in order to post incendiary false quotes attributed to Qatar’s emir, Sheikh Tamim Bin Hamad al-Thani, in late May that sparked the ongoing upheaval between Qatar and its neighbors, according to U.S. intelligence officials.

Officials became aware last week that newly analyzed information gathered by U.S. intelligence agencies confirmed that on May 23, senior members of the UAE government discussed the plan and its implementation. The officials said it remains unclear whether the UAE carried out the hacks itself or contracted to have them done. The false reports said that the emir, among other things, had called Iran an “Islamic power” and praised Hamas.

But... wait: didn"t US intelligence agencies just one month ago say it was all Russia"s fault? Looks like it took just one month for the CIA to change its mind. We wonder if and when it will the same to its "conclusion" confirmed by 17 4 intelligence agencies that Russia also hacked the DNC and John Podesta (although we won"t be holding our breath for that particular narrative shift). Back to the WaPo:

The hacks and posting took place on May 24, shortly after President Trump completed a lengthy counterterrorism meeting with Persian Gulf leaders in neighboring Saudi Arabia and declared them unified.  Citing the emir’s reported comments, the Saudis, the UAE, Bahrain and Egypt immediately banned all Qatari media. They then broke relations with Qatar and declared a trade and diplomatic boycott, sending the region into a political and diplomatic tailspin that Secretary of State Rex Tillerson has warned could undermine U.S. counterterrorism efforts against the Islamic State.

Then again, this may be just another fishing expedition (or better yet, clickbait) by the WaPo. Naturally, the Emirates denied everything:

In a statement released in Washington by its ambassador, Yousef al-Otaiba, the UAE said the Post story was “false.” “The UAE had no role whatsoever in the alleged hacking described in the article,” the statement said. “What is true is Qatar’s behavior. Funding, supporting, and enabling extremists from the Taliban to Hamas and Qadafi. Inciting violence, encouraging radicalization, and undermining the stability of its neighbors.”

Maybe he meant to say Saudi Arabia, but there"s just too many fake news in one place at this point to even keep track. Meanwhile, according to the WaPo even more subsequent hacks provided the detail needed to get to the bottom of the original hack:

The revelations come as emails purportedly hacked from Otaiba’s private account have circulated to journalists over the past several months. That hack has been claimed by an apparently pro-Qatari organization calling itself GlobalLeaks. Many of the emails highlight the UAE’s determination over the years to rally Washington thinkers and policymakers to its side on the issues at the center of its dispute with Qatar.

This confirms what we reported last month, when we said that Qatar - which has repeatedly charged that its sites were hacked, but has yet to release the results of its own investigation - accused the Arab states behind the embargo for also being behind the hack. Today"s WaPo report appears to confirm this:

Intelligence officials said their working theory since the Qatar hacks has been that Saudi Arabia, the UAE, Egypt, or some combination of those countries were involved. It remains unclear whether the others also participated in the plan.

Meanwhile, nobody is willing to say anything on the record, of course: "The Office of the Director of National Intelligence declined to comment, as did the CIA. The FBI, which Qatar has said was helping in its investigation, also declined to comment." Which is understandable: they are all busy going through any and all Trump emails intercepted by the NSA, looking for a smoking gun.

CNN"s fake news aside, what the WaPo report confirms, assuming it is accurate of course, is that the Arab states engaged in a "false flag" operation against Qatar, to provide them the justification for escalating the confrontation between Saudi Arabia and Qatar to its current crisis level, and potentially beyond: to war, considering Rex Tillerson"s attempts to mediate a resolution in his "shuttle diplomacy" tour in the Gulf over the past week proved to be a disaster.

That said, authenticity of the latest WaPo "report" is itself suspect. We look forward to another denial in several months which confirms what most likely actually happened: the NSA and CIA were those responsible for the Qatar "hacking", an event which has launched a destabilizing sequence of events in the middle east, and which according to many may culminate with war in the region, the ideal outcome for both the "Deep State" and the Military-Industrial/Neocon complex.

As for CNN, we are "confident" they will be issuing a retraction to their original "fake news" report any... minute... now...

Fasanara Capital: This Is The Bear Case For Oil

From Francesco Filia of Fasanara Capital

Oil: a weak present and no future

Oil correction (~10% from peak) is not necessarily the foretell of an imminent debacle. Oil corrected by approx. 20% twice in the past months (June-July 2016 and October-November 2016), without derailing the bull trend. Important supports were breached in both instances, and yet Oil managed to resurrect, powerfully.

However, this latest development with Oil offers the opportunity to update views, and record relevant incoming data in either confirmation or denial of our bearish thesis on Oil: so far, we seem to have confirmation.

1.    The most interesting element / ‘new news’ is that the forward oil curve is no longer exhibiting a marked ‘contango’ shape, meaning that long-dated forwards are no longer well above spot. In contrast, it is almost becoming ‘backwardation’. As the contracts are often used by real producers to hedge future output, this may happen in reflection of a market peak. 

2.    As a recent GaveKal research notes, OPEC is less relevant today than it has ever been. Russia, Saudi Arabia and Iran have today no more grip on oil prices (controlling 50% of oil global supply) than Rio Tinto, BHP Billiton and Vale demonstrably have on the price iron ore (of which they hold a 70% market share).

3.    As expected, higher levels for Oil have indeed led to a resumption of production and oil rigs formation in the US, over the past several months. Shale’s reaction function to levels of Oil above 50$ was entirely predictable. So it is predictable for the recent rebound in production to persist: as we noted in December, critically, US shale frackers had managed to notably decrease breakeven costs per barrel; for some shale types down to $29 from $59 in 2014, according to consultancy Rystad Energy.

4.    Promised deregulation of the oil market by Trump, and his friendly views on coal, may further exacerbate structural oversupply issues in the Oil market. This comes at a perilous time, as US crude oil exports are increasing at an alarming pace (see Chart below), and reaching more destinations, after the removal of restrictions on exporting US crude oil in December 2015. (EIA data and US crude Oil exports). The US is expected to export at least 0.8mn barrels per day in 2017 (according to analysts polled by Bloomberg), which would exceed that of OPEC members such as Lybia and Qatar. This is not far off from the 1.2m bpd of OPEC’s budgeted cuts, further eating into OPEC’s market share and therefore possibly undermining the stability of the agreement itself.

5.    Speculative positions on Oil are at historical highs, well above where they stood in the summer of 2014 (just before Oil started its 76% descent). They may be peaking now that China has partially put on hold its steroids-rich fiscal stimulus program, as of last summer, and started some tightening of its monetary policy. The speculation in Oil is reminiscent of the leverage built up for Iron Ore in the Dalian Commodity Exchange in China, reflected in record inventories at Chinese ports (see Chart below from GS Bulks Trading). Now that China slows the rate of credit growth to stem financial speculation, and the property cycle softens, we may see some of the leverage working in reverse. 

Source: CEIC, mysteel GS Bulks Trading.

6.    For what it"s worth, the fundamentally-proven and historically-strong correlation with the Dollar Trade Weighted Index would project a price for Oil sub-40$. We are now nearing a trend-line level, the test/break of which may determine an acceleration of the re-coupling.

In conclusion, not so much in denial of our long-term outlook for Oil, so far: therefore, we reiterate our view that Oil is defying gravity at current levels and is set to revisit lows in the not so distant future, due to overwhelming structural factors such as exponential technologies, shale oil/shale gas/nat gas, substitution effects. Long-term prospects have little bearing in the short-term for price-discovery, but do provide a magnet for prices over time, as cyclical factors like OPEC and speculation fade.

Over 5,000 Flights Canceled Due To Winter Storm Stella As NYC NatGas Price Soar

US carriers have grounded 1,796 flights today, and 3,384 tomorrow - numbers which keep constantly rising - as Winter Storm Stella approaches the U.S. Northeast, according to FlightAware.com. 

Chicago is bearing the largest share of Monday"s cancellations, while Tuesday"s disruptions are hitting hardest from Washington to Boston including the New York City area, AP adds. The major airlines are waiving ticket-change fees that range up to $200 for customers who want to change their travel plans. Restrictions vary by airline.

Southwest has canceled more than 300 flights for Monday and nearly another 900 scheduled for Tuesday, according to FlightAware. American Airlines and its American Eagle contractor Envoy Air together had canceled more than 300 flights Monday and 700 on Tuesday. JetBlue Airways, with major operations in Boston and New York, had already canceled more than 600 flights scheduled for Tuesday, FlightAware said.

The weather system may dump as much as 20 inches (51 centimeters) of snow from Connecticut to Long Island, including New York City, according to the National Weather Service. A deep freeze is poised to linger in the Northeast after the storm passes, sending Boston’s low to 14 degrees Fahrenheit (minus 10 Celsius) on March 16, 17 below average, AccuWeather Inc. data show

Meanwhile, as the blizzard bears down on the Eastern Seaboard, natural gas futures rose to one-month highs on speculation that demand for the heating fuel will surge during the storm, shrinking a supply glut, Bloomberg reports.

The late-winter cold blast is giving gas bulls a break after a warm start to the season sent the market plunging to an eight-month low earlier in the year. While gas stockpiles are still above normal for this time of year, frigid conditions could erode the surplus and stave off another price collapse before the summer.

“It’s not just tomorrow’s storm, but the forecast going out to late March that should be supportive for prices,” said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. “But we’re coming to the end of the season, and storage is pretty healthy.”

While gas futures for April delivery rose 1.2%, to $3.044 per mmBTU at after earlier reaching $3.089, the highest since Feb. 10, gas is still down 18 percent this year, the worst performer among major commodities. However, a look at spot prices for NYC nat gas shows a much bigger spike, which is to be expected as the region will be most affected by the coming weather.

Of course, once the weather system passes later this week, expect a similar and just as sharp drop in prices.

Speculation Grows That Bashar Assad Has "Suffered A Stroke" As Syria Slams Trump's "Safe Zone" Proposal

Geopolitical pundits were caught by surprise last Thursday when Donald Trump told ABC he would “absolutely do safe zones in Syria for the people", a statement that was has been viewed as a precursor to further escalation of US intervention in the region. They were just as surprised overnight when instead of challening Trump"s decision to potentially send more troops into Syria, Russia Foreign Minister Sergey Lavrov said Moscow may support the US initiative to establish so-called ‘safe zones’ for refugees in Syria, but added that the plan would require close cooperation with the UN and approval from Syrian President Bashar Assad’s government.

“If this is about the people who were forced to leave their homes by the conflict, […] getting their basic needs covered, […] then I think that the idea to create areas within Syria for those internally displaced could be discussed with the UN’s High Commissioner for Refugees and other organizations,” Lavrov said cited by RT.

Lavrov said the American proposal to create secure areas for refugees within Syria was put forward in the context of migrant flows to the neighboring countries, the Middle East, as well as Europe, and “at the end of the day, the US."

He noted that the US initiative is completely different from what Western countries proposed at various stages of the Syrian war. "There have been ideas of creating some areas where an alternative Syrian government could sit, and use those areas for regime change." Such a scheme was seen in Libya, where the establishment of an alternative government in Benghazi was used as a pretext for the Western-led invasion to topple the regime of Muammar Gaddafi, Lavrov explained, adding that the Libyan intervention went ahead despite no green light from the UN Security Council.

While promising, the proposal would require negotiations with Damascus to agree on the principles of creating such safe zones on Syrian territory, Lavrov added.

However, just hours after his interview, the narrative regained some sense of normalcy after the state-run Sana news agency published a statement from the government pouring cold water all over the proposed plan, and saying that any attempt to install safe zones without its consent would constitute an "unsafe action" that is a "violation of Syria"s sovereignity." Syria"s foreign ministry and the United Nations refugee agency had agreed on the issue during a meeting in Damascus, SANA said.

According to a document seen by Reuters, Trump is expected to order the Pentagon and State Department to craft a plan for setting up the safe zones, a move that could risk escalation of U.S. military involvement in Syria"s conflict.  Rebel backers including Qatar have welcomed Trump"s support for safe zones, and Turkey says it is waiting to see the outcome of the U.S. president"s pledge.  As noted previosly, cCreation of safe zones could ratchet up U.S. military involvement in Syria, including increased U.S. air power to enforce "no fly" restrictions and ground forces to protect civilians in those areas.

But where things again take a twist for the bizarre, is a report over the weekend from Al Arabiya according to which news has been circulating on the internet since Friday stating that Syrian President Bashar al-Assad is experiencing serious health problems. The website reports that according to some media outlets said that Assad had suffered a stroke; while others said that he was shot and has been taken to Damascus Hospital for treatment. Some details:

France’s Le Point, speculated that Assad might have been assassinated by his personal Iranian Bodyguard Mehdi al-Yaacoubi, going so far as to say that he shot him in the head.

Lebanese newspaper, al-Mustaqbal, quoted “reliable sources” as saying that Assad suffered from a cerebral infraction and was transferred to Damascus Hospital where he is being treated under high security.

As for the Saudi newspaper Okaz, Assad is suffering from a “brain tumor.” He tried to cover up his illness through short and frequent appearances. According to its sources, Assad is being treated by a Russian-Syrian medical team on a weekly basis, adding that he has undergone medical tests when he was in Moscow in October.

Furthermore, pro-Syrian regime Lebanese newspaper al-Diyar reported on Friday that Assad suffered from a stroke, but later denied the news.  There were also rumors that Assad is at the American University Hospital (AUH) in Beirut. However, Al Arabiya contacted the hospital and no information on the issue was given. Al Arabiya has also tried to contact Damascus Hospital, but there has been no response.

On the other hand, in a statement carried by the Presidency of the Syrian Arab Republic page on Facebook, Syrian authorities said that such rumors were incorrect.

While the rumor remains unsubstantiated, the death of Assad is sure to complicate any political resolution in Syria, as it would immediate promp both sides in the proxy war to present their handpicked candidates ahead of an election for the country"s next president as suddenly the political - and not military - process will become the pathway to decide who has veto rights over any potential Qatar nat gas pipeline crossing the nation and entering Europe. If so, expect Rex Tillerson to be very busy over the coming months as Syria once again becomes a primary object of US diplomacy in the middle east.

Treasury Specs Are So Short, It Is Now A 4 Sigma Event

With doubts that the "Trumpflation" trade is over creeping ever higher, leading to a precarious decline in the USD in recent days, and prompting comparisons to the Dollar"s move at the start of 2016 when the greenback"s ascent dramatically reversed...

... resulting in a pick up in the long end, which has outperformed the Dow YTD in 2017...

... it was surprising to see that traders, seemingly unfazed by recent price action, took their record shorts across the Treasury curve, and made them even recorder.

According to the latest breakdown of short positions by Deutsche Bank, speculators increased their net shorts by $7.7 billion in 10Y cash equivalents to $99.4 billion, a third successive week of record low positions.

The Breakdown by 5Y net specs...

... 10Y net specs...

... and 30Y net specs...

... shows just how aggressive the short pile up has been.

According to DB"s calculations, the net short position is now a four sigma event, having grown to nearly four standard deviations away from mean, even after adjusting for open interest.

TY and FV net spec shorts reached new record highs of 395K (+50K) contracts and 437K (+27K) contracts, respectively. An exception was in TU futures where specs pared 35K contracts from their net shorts. Spec net short in Eurodollars also increased to a new record high of 2,442K (+326K) contracts.

And while other asset classes were relatively unchanged, with the recent surge in net specs in oil, nat gas and copper all moderating slightly in recent weeks...

... a separate observation by Bank of America suggest that the recent hedge fund infatuation with equities may be over, after hedge funds net sold the most S&P 500 contracts in a week since Jan. 2016., while the recent surge in Russell bullish bets also appears to have found a ceiling for now, and while buy-side net position in Russell 2000 was near record high (a "contrarian bearish" signal), a near term a move below 1347.2 would trigger a tactical bearish signal for the 1308.85 to 1300 area, according to Bank of America.

Of all of the above, keep an eye on the record(er) TSY shorts: a few more indication that the Trump reflation rally is over, or worse, inverting especially if the recent spike in positive macro news tapers off, we may witness one of the most violent short squeezes across the rates complex in history.