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Tue, 25th April 2017

Anirudh Sethi Report

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Posts Authored by: “Anirudh Sethi”

Bitcoin Back Near Record Highs As SEC Reviews ETF-Blocking Decision

Bitcoin is up 8 days in a row, pushing back above gold, shaking off its ‘fork’ concerns and testing towards $1300 today as the SEC announces that it intends to review its decision to reject a bitcoin ETF proposed by the Winklevoss twins.

The SEC said yesterday that it had approved the petition, opening the door to further comment between now and 15th May. The agency said:

 “Pursuant to Rule 431 of the Rules of Practice,11 BZX’s petition for review of the Disapproval Order is granted. Further, the Commission hereby establishes that any party to the action or other person may file a written statement in support of or in opposition to the Disapproval Order on or before May 15, 2017.”

The move comes weeks after the SEC rejected another bitcoin-tied ETF, proposed by SolidX, that would have listed on the NYSE Arca exchange if approved.

Full note below:

As previously reported by CoinDesk, the SEC shot down a bid by the Winklevoss brothers to get the ETF listed on the Bats BZX exchange in March. Specifically, the agency declined a rule change proposed by Bats that would have cleared the path for the ETF, citing a lack of market surveillance and regulation. Less than two weeks after the decision was handed down, Bats petitioned for a review – a move that the agency has now approved.

Sweden’s Gold Reserves: 10,000 gold bars (pet rocks) shrouded in Official Secrecy

In February 2017 while preparing for a presentation in Gothenburg about central bank gold, I emailed Sweden’s central bank, the Riksbank, enquiring whether the Riksbank physically audits Sweden’s gold and whether it would provide me with a gold bar weight list of Sweden’s gold reserves (gold bar holdings). The Swedish official gold reserves are significant and amount to 125.7 tonnes, making the Swedish nation the world’s 28th largest official gold holder.

Before looking at the questions put to the Riksbank and the Riksbank’s responses, some background information is useful. Sweden’s central bank, Sveriges Riksbank aka Riksbanken or Riksbank, has the distinction of being the world’s oldest central bank (founded in 1668). The bank is responsible for the administration of Swedish monetary policy and the issuance of the Swedish currency, the Krona.

Since Sweden is a member of the EU, the Riksbank is a member of the European System of Central Banks (ESCB), but since Sweden does not use the Euro, the Riksbank is not a central bank member of the European Central Bank (ECB). Therefore the Riksbank has a degree of independence that ECB member central banks lack, but still finds itself under the umbrella of the ESCB. Since it issues its own currency, the Riksbank is responsible for the management of the Swedish Krona exchange rate against other currencies, a task which should be borne in mind while reading the below.

On 28 October 2013, the Riksbank for the first time revealed the storage locations of its gold reserves via publication of the following list of five storage locations (four of these locations are outside Sweden) and the percentage and gold tonnage stored at each location:

  • Bank of England               61.4 tonnes (48.8%)
  • Bank of Canada               33.2 tonnes (26.4%)
  • Federal Reserve Bank   13.2 tonnes (10.5%)
  • Swiss National Bank        2.8 tonnes (2.2%)
  • Sveriges Riksbank         15.1 tonnes (12.0%)

The storage locations of Sweden’s official Gold Reserves: Total 125.7 tonnes

World Stocks Hit All Time High, S&P Futures Rise To Within 1% Of Record

After yesterday’s violent gap up in stocks across the globe in response to the “expected” outcome from the French election, today the risk on sentiment has continued if to a lesser extent, with stocks in Europe, Asia all rising while S&P futures point to a higher open. Yen, gold decline, while the euro traded as high as 1.09 this morning before fading some gains; oil is up modestly.

While today’s surge may have been more muted, world stocks hit a new record high on Tuesday, with investors still cheering Macron’s victory in the first round of the French presidential election, supported by speculation about U.S. tax reform and the overnight report that Trump has conceded on the border wall, eliminating a government shutdown as a potential risk. As shown below, the MSCI All World Index has jumped to a new all time high, boosted by strong Asian markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6%, hovering near its highest level since June 2015 hit earlier in the session, on its fourth straight day of gains. Japan’s Nikkei rose more than 1 percent to a three-week high aided by a weaker yen. South Korea’s also advanced 0.7 percent to its highest level since April 2015. China equities climbed from a three-month low on speculation that a selloff over concerns of a regulatory crackdown were overdone. Australia and New Zealand were closed for Anzac Day.

European stocks hovered near a 20-month high, with the Dax flirting with all time highs. The Stoxx Europe 600 index edged 0.2% higher after jumpin 2.1% on Monday to the highest since August 2015, with property and technology shares helping to underpin a global rally. French shares pulled back 0.1 percent, having risen 4.1 percent on Monday in their biggest daily gain since August 2012. Futures on the S&P 500 added 0.1 percent. The index climbed 1.1% Monday to within 1% of its all-time closing high.

These gains helped push MSCI’s world stocks index to a fresh all-time high after chalking up its biggest rise since shortly after Britain’s vote last June to leave the European Union.

Made in China: First Indigenous Aircraft Carrier Set for High Seas

China's Liaoning aircraft carrier with accompanying fleet conducts a drill in an area of South China Sea in this undated photo taken December, 2016The first Chinese made aircraft carrier is 100 percent ready to set sail, local news sources reported.

Once sea conditions reach a point that’s comfortable for admirals, the Chinese-made ship will be on its way to test the waters for the first time, according to the South China Morning Post. The enigmatic ship still has yet to be named. So far, she is only referred to by her technical classification, Type 001A.

She will displace 70,000 tons of water, measuring 315 meters in length and 75 meters in width. “Although the launch has been heralded by some as a sign that China is mastering naval technology, other military observers have noted China still only has about four percent of the United States’ naval capability,” according to a Monday report published in the SCMP.

The ship is being constructed at the Dalian Shipyard, a port in northern China’s Liaoning province that happens to share a border the Democratic People’s Republic of Korea (North Korea). The launch of the aircraft carrier is imminent, since the ship’s hull appears complete and the construction scaffolding draping the ship has been taken down, according to an IHS Jane’s report. 

China’s other aircraft carrier, the Liaoning, conducted live-fire drills for the first time in November of last year. The People’s Liberation Army Navy (PLAN) has been aggressive in pursuing a larger and more assertive fleet. 

The two aircraft carriers could be a small sign of things to come for the ambitious Chinese navy. Some analysts suspect PLAN is pursuing a fleet of more than 500 vessels, including subs, carriers, destroyers, amphibious vehicles, frigates and other naval hardware, Sputnik reported in January. 

Some observers suggest sailing aircraft carriers thousands of miles for long periods of time — most US carriers only need to stop for one refueling during the entire course of the ship’s “shelf-life” — is a way for China to display and reinforce its ascendency to its status as a major global power. 

Obama To Receive $400,000 Speaking Fee At Cantor Fitzgerald Conference

Shortly after Barack Obama delivered his first (free) speech today since leaving the White House in Chicago before an invitation-only crowd of college students, community organizers and other fans, Fox News’ Charlie Gasparino reports that in what may be his first paid speaking arrangement, Obama will be paid $400,000 to speak at Cantor Fitzgerald’s healthcare conference this September, setting the benchmark for how much an hour of the former president’s time will cost going forward.

Obama, who spent years bashing big banks (even if, like Trump, ultimately achieved nothing to halt Wall Street’s dominance) will deliver the keynote address at the organization’s lunch in what will be one of his first paid speeches.

“What sources are telling FOX Business Network is that former President Obama, now less than 100 days out of office, has agreed to a speaking engagement during Cantor Fitzgerald’s healthcare conference in September,” FBN’s Gasparino said. “We understand that he is going to be the keynote speaker for the lunch, and he’s going to receive a fee of $400,000. We should point out that that’s in line with what Hilary Clinton got… we should point out that Cantor will neither confirm or deny.”

Trump To Order Corporate Tax Rate Cut To 15%, Loading Up To $2 Trillion In Extra Debt

Ahead of Trump’s much anticipated tax announcement on Wednesday, the WSJ reports that the president has ordered his (mostly ex-Goldman) White House aides to accelerate efforts to create a tax plan “slashing the corporate rate to 15% and prioritizing cuts in tax rates over an attempt to not increase the deficit” which means that without an offsetting source of revenue, Trump is about to unleash the debt spigots, a proposal which will face fierce pushback from conservatives as it is nothing more than a continuation of the status quo under the Obama administration, and may well be DOA.

The WSJ adds that during an Oval Office meeting last week, “Trump told staff he wants a massive tax cut to sell to the American people” and that it was “less important to him if the plan loses revenue.”

Hoping to add a sense of dramatic urgency – after all his 100 day deadline hits on Saturday – Trump told his team to “get it done,” in time to release a plan by Wednesday.

Translation: Trump’s massive tax cut will be funded by debt, and as a result, will be at best temporary as it will be in breach of the revenue constraints in the reconciliation process; at worst it will never happen as it will now require Democrat votes.

“Top Iron Ore Forecaster Says Prices Will Sink Back Below $50”

Heightened interest in all things related to iron ore

Bloomberg with this from Justin Smirk, senior economist at Westpac (placed first in predicting prices in the first quarter, according to data compiled by Bloomberg):
  • To average $62 in Q3 
  • $59 in Q4
  • And to a low in 2018 of $41
“As supply builds up and prices come off, people will begin to question the wisdom of holding on to inventories,” Smirk said in a phone interview on Friday. “The signs are now pushing in one direction: while we’ll get some volatility, the momentum is just on a downward trend now.”