Baltic Dry Index. 879 -05
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Lenin was certainly right. There is no
subtler, no surer means of overturning the existing basis of society than to
debauch the currency. The process engages all the hidden forces of economic law
on the side of destruction, and does it in a manner which not one man in a
million is able to diagnose.
John Maynard Keynes.
We open today with a load of bull. The bullish case
that the recovery in America is real and has reached self-sustaining escape
velocity. With a massive natural gas price advantage over the rest of the world’s
nat-gas costs, the US economy might just be ready to rock and roll. If so, the
new Fed bubble is about to go exponential. Shame about the great 30 year bond
bubble though. If/when the Fed drops QE forever we all slam into the cliff at
warp speed. If the Fed doesn’t drop QE forever and the self-sustaining US
recovery is real, the era of the giant inflation is about to arrive. My money’s
on the latter. Central banksters just love inflation. Stay long precious
metals. The Fed and the other central banksters have trapped themselves in a
nasty corner with no good outcomes. No wonder Bernoccio is giving Jackson Hole
a pass this year.
“Markets
can remain irrational longer than you can remain solvent.”
John Maynard Keynes.
Is economy ready to rock? A bull’s view
May 13, 2013, 3:24 PM
Are improved retail sales in April an omen the U.S. economy is ready to
rock? Bernard Baumohl seems to thinks so.The chief economist of The Economic Outlook Group believes the U.S. “may be on the precipice of faster growth.” And consumers are the main reason, he wrote in an analysis Monday after the government reported that retail sales rose 0.1% in April. Wall Street had been expecting a sharp drop.
Mind you, Baumohl is no “sun-is-always-shining” economist. He only began to sound an optimistic note toward the end of 2012, and it’s just in the last few months that he’s turned into one of the most bullish economists in the U.S.
What’s behind his upbeat view? Baumohl argues that Americans are ready to “ramp up spending” because of falling gasoline costs, rising stock prices and home values, an improved labor market, and extended efforts by the Federal Reserve to boost growth.
Start with gasoline. The average nationwide cost of fuel sank again in April and fell to the lowest level for that particular month since 2010, Baumohl noted. The decline in April alone is worth $13 billion in savings for consumers, he calculated.
Hiring in the U.S., meanwhile, snapped back in April after softening in March, while job openings have risen and layoffs continue to decline. While the labor market is not great, Baumohl said the steady increase in hiring and gradual improvement in wage growth is giving consumers more confidence.
So, too, is the rally in U.S. stocks and the recovery in the housing market that’s lifting long-depressed home prices.
“History has shown that the two most important drivers of consumer spending are job security and changes in household wealth,” Baumohl wrote. “Both are setting the stage for more consumption.”
The unexpected increase in retail sales in April also appears to have caught businesses by surprise: retail inventories sank in March by the most in two years. Companies will have to increase production to replenish their stockpile of goods, he said.
Against that backdrop, Baumohl expects the Federal Reserve to maintain its massive bond-buying program to keep interest rates low.
“With consumer spending snapping back, business inventory
investments expected to accelerate, and a Federal Reserve that will remain
highly accommodative this year, the economy may be on the precipice of
faster economic growth,” he said.
More
Next, compare and contrast the New World with
Euroland. Here in the 21st century German serfdom of Euroland, the
austerity racked serfs are busy seeking out the new Spartacus. While Club Med
clamours for a full banking union and the keys to the German treasury, the
German finance minister lays the treaty
change card on behalf of Mrs Merkel’s September re-election campaign.
Playing the new treaty card with the UK seeking major concessions to remain in
the game, is a high stakes reckless gamble it seems to me on the free side of
the English Channel. A straight gift to those already committed to reform or
exit by the end of the decade. The eurozone in its present form is coming to
its end.
“When
the final result is expected to be a compromise, it is often prudent to start
from an extreme position.”
John Maynard Keynes.
Europeans must face up to prospect of massive debt restructuring
Europe’s bourses have not done as well as others from renewed investor appetite for equities, but even the depression-hit eurozone periphery has seen big gains in share prices since the sovereign debt crisis began to abate last summer.
Does this
mean that pole-axed though some of these economies remain, things are about to
change for the better?
Sorry to
be a wet blanket, but regrettably not, and for this reason. The roots of
Europe’s problems lie not in the credit crunch of 2008-9 – for Europe, the
banking crisis is a mere symptom of an underlying illness – but as far back as
1995, when preparations for the euro caused interest rate convergence across
what had previously been structurally very different economies.
This in
turn created a credit bubble in the periphery; in some countries it was more a
private sector phenomenon, in others a public sector one, and in at least two
countries it was both. In any case, wages and prices in the periphery began to
diverge from the core. There was stagnation in Germany and strongly rising
prices in the periphery, making the periphery progressively less competitive.
This misalignment in prices led to a rising trade surplus in the core, but
ballooning deficits in the periphery.
And
that’s what the eurozone maelstrom is about – it is a classic, uncorrected
balance of payments crisis. Normally, such crises are stemmed through the
natural market mechanism of exchange rate movements, which both restore price
competitiveness and, through devaluation, haircut the debt overhang in deficit
nations.
There is
no such automatic stabilisation mechanism in monetary union. The result is a
debt standoff, with creditor nations demanding their pound of flesh from
debtors forced into self-defeating penury in an attempt to provide it.
----Yet look beneath the bonnet, and neither of these phenomenon can be counted a success. True enough, some deficit nations are doing well on exports – certainly better than Britain, with its apparent “advantage” of currency devaluation. But in most cases exports still remain below pre-crisis levels.
No, the
primary reason that current account deficits are closing is that internal
demand has collapsed, and with it, consumption of imported goods and services.
Much the same dynamic underlies the apparent success with unit labour costs.
What improvement there has been – actually in Italy it has been pretty marginal
– is driven primarily by rising unemployment, or fewer workers producing the
same amount of goods and services.
What’s
more, the primary focus of wage adjustment has been in the public sector,
because that’s where it can most easily be achieved. Nominal wage reductions in
the traded goods and services sectors have been far less marked.
More
Spain, Portugal push for full banking union as Germany finds hurdles
BRUSSELS/MADRID |(Reuters) - Spain and Portugal called on Monday for the euro zone to complete a banking union as Germany underscored legal hurdles before a central element of the plan to deal with failing banks can be introduced.
"It is indispensable that we stick to the agreed calendar on banking union and that we take steps to make sure families and small companies receive credit," Spanish Prime Minister Mariano Rajoy told reporters.
"Banking union is the credibility test of the European Union," he said, after meeting Portuguese Prime Minister Pedro Passos Coelho, who backed his calls for progress on Europe's most ambitious reform of the financial crisis.
The call came as finance ministers from the euro zone met in Brussels, ahead of which German Finance Minister Wolfgang Schaeuble reiterated the need for a change to EU treaties to underpin the new system of bank resolution.
----To avoid treaty change and have a banking union "of sorts" Schaeuble proposed to stick for now to the intermediate stage of a coordinated network of national resolution authorities, rather than a new EU resolution authority.
"This would be a timber-framed, not a steel-framed, banking union," Schaeuble wrote.
Most euro zone countries and institutions believe a full banking union, which would help deal with banking crises, is needed urgently to restore investor confidence.
----But while the ECB bank
supervision looks set to take effect as planned, the single authority that
would order and finance the closure of a bank is unlikely to materialize soon,
because Germany believes it needs a change to the EU treaty.
More
We end for today with what passes for investing in
the Fed’s new casino bubble. When this all blows up in the next Lehman, even
the Fed hasn’t the resources to put it right.
“When
the capital development of a country becomes a by-product of the activities of
a casino, the job is likely to be ill-done”
John Maynard Keynes.
May 6, 2013 11:22 am
This Is What One Half Second of High Speed Trading Looks Like
The New York Stock Exchange is built on incredibly quick trades. About
10 million of Johnson & Johnson’s shares are traded each day, for instance.
This video shows just one half-second of those trades:
The creator of this video, Eric Hunsader, explain what you’re looking at:
Each box represents one exchange. The SIP (CQS in this case) is the box at 6 o’clock. It shows the National Best Bid/Offer. Watch how much it changes in a fraction of a second. The shapes represent quote changes which are the result of a change to the top of the book at each exchange. The time at the bottom of the screen is Eastern Time HH:MM:SS:mmm (mmm = millisecond). We slow time down so you can see what goes on at the millisecond level. A millisecond (ms) is 1/1000th of a second.
If this is confusing to you, you’re not alone. High speed trading is incredibly complicated and hard to keep up with. Radiolab has a good explanation of just how these incredibly quick trades go down.
Click on
the link for the video. Watch the HFC
computer at the 12 o Clock position.
“How long will it be necessary to pay City men so entirely out
of proportion to what other servants of society commonly receive for performing
social services not less useful or difficult?”
John Maynard Keynes.
At the Comex silver depositories Monday final figures were: Registered 44.98
Moz, Eligible 119.90 Moz, Total 164.89 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on the scandal rocking big brother
Bloomberg. Who knew what and when is only the start of it. Data mining who at
the Goldman’s, the Fed, the EU, the ECB, etc., was tracking what and which
companies ought to be very profitable if sold on to the casino hedgie
community. With the right bit of information it alters the house odds in favour
of the mere punter. Bloomberg has a whole lot more explaining to do before this
scandal comes to its end.
“I
find economics increasingly satisfactory, and I think I am rather good at it. I
want to manage a railroad or organise a Trust or at least swindle the investing
public”
John Maynard Keynes.
Private Bloomberg message posted online in fresh blow to City data company
More than 10,000 private memos sent through Bloomberg’s messaging system have been illegally published online, heaping more pressure on the company as it battles to convince the City that its $20,000-a-year terminals are secure.
The
leaked information dates from 2009 and 2010, and includes messages from traders
at more than a dozen of the world’s largest banks, including Goldman Sachs, JP
Morgan and Barclays.
The
revelation came as the European Central Bank and Bundesbank launched
investigations into claims that Bloomberg journalists used its terminals for
“spying” on officials. They joined the US Treasury and the US Federal Reserve
in investigating claims that reporters have been tracking individual users of
the terminals, to see when they were logging on and how frequently they used
certain features.
Many City
employees rely on the machines for real-time information about share prices,
currency fluctuation and breaking financial news. The devices, often called the
“all seeing eye”, also offer a messaging service which is supposed to act as a
secure, business equivalent of a social network.
Bloomberg
cut off its reporters’ access to the information shortly after senior
executives at Goldman raised the alarm last month.
Bloomberg’s
editor-in-chief, Matthew Winkler, sought to draw a line under the scandal on
Monday, by apologising for the “inexcusable” fact that journalists have been
allowed to access private information about how customers use the service. He
said the facility was initially put in place to help reporters gather
information about how they could improve the service for customers, but
reassured users that its reporters could only track when messages were sent,
not what they said.
The leak
of thousands of messages will undermine Bloomberg’s attempts to restore faith
in the company’s terminals.
The
information was posted online by Steve Rann while he was employed by Bloomberg
and working on a data project for one of its clients. Mr Raan planned to upload
the information to a secure website, but instead posted it publicly, so that
anyone could find the messages through a simple Google search.
It was
feely available online for years, before being taken down on Monday.
More
Lenin is said to have declared that the
best way to destroy the capitalist system was to debauch the currency. By a
continuing process of inflation, governments can confiscate, secretly and
unobserved, an important part of the wealth of their citizens. By this method
they not only confiscate, but they confiscate arbitrarily; and, while the
process impoverishes many, it actually enriches some. The sight of this
arbitrary rearrangement of riches strikes not only at security but [also] at
confidence in the equity of the existing distribution of wealth.
Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers," who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.
John Maynard Keynes.
The monthly Coppock Indicators finished April:
DJIA: +133 Up. NASDAQ: +139 Up. SP500: +170 Up. Another Fed bubble underway. But when to jump
off before it ends?
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