Baltic Dry Index. 1092 -25
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
Every normal man must be tempted, at times, to spit on his hands, hoist the black flag, and begin slitting throats.
H. L. Mencken.
It is another lazy Friday in high summer in
the northern hemisphere, what could possibly go wrong? The Great Disconnect in
global stock markets may have lost its “all news is good news” zest, but
Detroit aside, there’s very little sign of an end to the Great Disconnect. It
is July 1987 all over again. Stay long physical precious metals for the coming
crash season.
We open today with Japan again. I suspect
that this might be the peak for Abenomics. Having stolen the rest of the world’s
lunch, a hungry and angry ROW is about to get even.
There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.
J. K. Galbraith.
Japan Prices Rise Most Since ’08 in Boost for Abe: Economy
By Toru Fujioka & Andy Sharp - Jul 26, 2013 4:28 AM GMT
Japan consumer prices rose the most since 2008 in June, an early sign that
the world’s third-biggest economy may be starting to shake off 15 years of
deflation. Consumer prices excluding fresh food increased 0.4 percent in June from a year earlier, the statistics bureau said in a statement today. The median estimate of 29 economists was for a 0.3 percent gain, a Bloomberg News survey showed. Excluding energy as well, prices dropped 0.2 percent, continuing more than four years of declines.
As Prime Minister Shinzo Abe’s policies weaken the yen and energy costs rise, the increase in consumer prices could stoke inflation expectations and encourage companies and consumers to spend more, bolstering the economic recovery. After April’s unprecedented monetary easing, the next challenge for Abe is to loosen constraints on the labor market and companies to achieve sustained growth and a goal of 2 percent inflation.
“Japan’s economy is on the right track to pull out of deflation,” said Tomo Kinoshita, chief economist at Nomura Holdings Inc. in Tokyo. “The relatively large increase in prices should have a knock-on effect of enhancing consumer and business inflation expectations.”
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Despite Bernanke’s panicky U-turn on “tapers,” and flooding the airwaves with dovish Federal Reserve spin meisters peddling QE forever, it’s hard to put the genie back in the bottle, since Bernocchio spun his favourite WSJ hack on the end of QE forever. The trouble with the Fed’s spin meister’s peddling QE forever, is that their lips move. We’re at the end of a 32 year bear market in bond yields, the next move is higher yields and everyone knows it, including Bernocchio. “Trust me, I won’t do it again,” doesn’t cut much ice especially in New York at present. If the Fed isn’t going to buy bankrupt Uncle Sam’s sovereign debt sometime soon, the other buyers get decidedly twitchy and anxious. The roof’s not falling in yet, but everyone knows it soon will. The only “good news” for Bernocchio, US Q2 13 growth was likely weaker than first estimated. QE forever may be forever! More reason for the wealthy to have some physical precious metals down in the basement.
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."Elgin Groseclose
Treasury Demand Weakens at Note Sales Amid Fed Taper Speculation
By Jeff Marshall & Susanne Walker - Jul 26, 2013 12:00 AM GMT
Treasury’s sale of $99 Billion in two-, five- and seven-year notes this week
met with weaker-than-average demand amid speculation the Federal Reserve may
indicate a reduction of its bond-buying program. The bid-to-cover ratio on the $29 billion in seven-year notes sold yesterday, which gauges demand by comparing the amount bid with the amount offered, was 2.54, the lowest since May 2009. The ratios were also below the averages of the prior 10 auctions on the sales of $35 billion in five-year and $35 billion in two-year notes the preceding two days.
“The drop in the bid-to-cover would seem to confirm uncertainty about near term direction in rates, especially with the Fed’s FOMC meeting scheduled for next week,” Adrian Miller, director of fixed-income strategies at GMP Securities LLC, said in a report yesterday. Miller said the “mixed performance” of the seven-year securities, which saw lower aggregate demand and higher non-dealer bidding at the auction.
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More jeers for U.S. economy’s second-quarter performance
July 25, 2013, 3:25 PM
The incredible shrinking second quarter is getting smaller by the week.A handful of Wall Street firms on Thursday cut their estimates of U.S. growth – yet again – for the April-to-June period.
The latest catalyst was a decline in so-called core shipments of durable goods in the final month of the quarter. Shipments of these goods, say machinery, computers and appliances, figure prominently in calculations of gross domestic product.
Some firms only took their forecasts down a peg. Goldman Sachs, for example, trimmed its estimate to 0.6% from 0.7%. Yet Barclays slashed its forecast to 0.5% from 1.5%, also citing weaker U.S. trade and slower growth in inventories to explain why its reduction was much larger. A falling trade deficit and faster inventory stockpiling boost gross domestic product while the opposite weaken growth.
Whatever the case, the second quarter is likely to have been a slow one, at least officially. The MarketWatch survey of economists expects 1.1% growth in the second quarter, though that number is likely to be revised lower.
As Pantheon economist Ian Shepherdon put it, “all its takes now is a sneeze in the wrong direction for the U.S. to print a negative Q2 GDP number.”
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Dollar languishes at 5-wk low as Fed eyed, Japanese shares tumble
TOKYO |(Reuters) - Tokyo shares tumbled on Friday on the back of a stronger yen and the dollar languished at a five-week low against a basket of currencies as investors waited for clarity on U.S. stimulus at the Federal Reserve's policy meeting next week.
European shares were expected to open higher, with London's FTSE 100 .FTSE seen up as much as 0.4 percent and Frankfurt's DAX .GDAXI indicated up 0.7 percent, while the S&P 500 index futures added 0.2 percent.
A Wall Street Journal report that the Fed may debate changing its forward guidance to help ram home its message that it will keep interest rates low for a long time to come put the dollar on the back foot overnight.
But most economists and traders still expect the Fed could start tapering its monetary stimulus in September.
More
Back across the Atlantic in the continent of
lying politicians and sclerotic Eurocrats, it was a so-so week in dying
Euroland. Unable to wean itself from the poison of the one size fits all
Germanic euro, Club Med lingers, on but getting weaker with each passing week.
Below, contrast and compare not having a sovereign fiat currency, flawed as it
is, with having one. John Bull may not exactly be healthy, but compared to
Europe’s Pierre’s, Pietro’s, Pedro’s, Peadar’s and Petros’s, all operating on
the wealth destroying European Deutsche Mark, John Bull is practically Adonis.
"When it becomes serious, you have to lie"
Jean-Claude Juncker. Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar.
S&P lowers credit ratings on 18 Italian Banks
Ratings agency sees Italian economy still struggling in 2014
24 July, 20:14
(ANSA) - Rome, July 24 - Standard &
Poor's cut the long-term credit rating of 17 Italian banks by one notch on
Wednesday due to the lingering recession, but did not include two of the
country's largest lenders in its announcement.
Another lender, Agos Ducato, was downgraded two notches from BB+ to BB-.
Intesa Sanpaolo and UniCredit were not included in the downgrade by the agency,
which earlier this month downgraded Italy's sovereign rating to BBB from BBB+
with a negative outlook.
Both moves will likely increase borrowing costs for the banks involved as well as the government.
Standard & Poor's said its concerns stem from the negative outlook for the Italian economy.
Both moves will likely increase borrowing costs for the banks involved as well as the government.
Standard & Poor's said its concerns stem from the negative outlook for the Italian economy.
"In our opinion, Italian banks have
to operate in a situation with increasing risks to the economy, which leaves
them more vulnerable to a longer and deeper recession...than previously
expected," said the rating agency in a statement Already in recession,
Italy's gross domestic product (GDP) will contract by 1.9% in 2013, said the
agency.
This means GDP will have dropped by fully 9% in real terms from 2007 levels by the end of this year, S&P said, adding that it did not expect to see "this trend reverse significantly in 2014".
This means GDP will have dropped by fully 9% in real terms from 2007 levels by the end of this year, S&P said, adding that it did not expect to see "this trend reverse significantly in 2014".
Jobless Parisians Mean Fewer Peugeots in Slumping France
By
Mathieu Rosemain - Jul 24, 2013 11:01 PM GMT
Marie-Estelle
Cevatheean dreams of a new car that would be better suited to her growing
family after having a baby late last year. Instead, with no work, the
31-year-old Parisian can’t afford to replace her seven-year-old Citroen C3
subcompact.
“We don’t
have the money yet to buy a new car,” Cevatheean said. “I need to find a job
first.”
With unemployment in France rising and consumer confidence at a record low, auto sales in the country have tumbled more than any other major European market this year. That portends more pain for French automakers Renault SA (RNO) and especially cash-strapped PSA Peugeot Citroen.
“France is probably the most vulnerable market today,” said Yann Delabriere, chief executive officer of Paris-based Faurecia (EO) SA, Europe’s largest maker of car interiors.
The French automakers will reveal the extent of their home-market woes when they report first-half earnings in the coming days. Paris-based Peugeot, which will release results on July 31, is due to report an operating loss of 315 million euros ($417 million), versus a profit of 4 million euros a year ago, according to the average of four analyst estimates compiled by Bloomberg.
----Peugeot is in talks with unions about improving productivity at factories, following Renault’s lead after it reached an agreement with workers in March. Peugeot, which is closing one factory near Paris and eliminating 11,200 jobs, has said it may need more restructuring if the European market continues to slide.
“We haven’t hit the floor in France yet” because higher taxes are set to weaken demand further, said Florent Couvreur, an analyst at CM-CIC Securities in Paris. IHS Automotive forecasts a 6.9 percent decline this year to 1.77 million passenger cars. Couvreur predicts the market could fall as low as 1.5 million vehicles.
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U.K. Economic Growth Quickens to 0.6% as Recovery Gains
By Jennifer Ryan - Jul 25, 2013 10:02 AM GMT
U.K.
economic growth accelerated in the second quarter as all main industries
showed expansion for the first time in three years, indicating Britain’s
recovery is gaining traction. Gross domestic product increased 0.6 percent from the first quarter, when it rose 0.3 percent, the Office for National Statistics said in London today. That matched the median forecast of 37 economists in a Bloomberg News survey. Services, production, construction and agriculture all grew, the first time that has happened since the third quarter of 2010. From a year earlier, GDP rose 1.4 percent.
Strengthening labor-market and retail-sales data in the past month have added to signs that the economy is on the mend after a recession that’s left GDP 3.3 percent below its peak in early 2008. The Bank of England will outline next month its approach to forward guidance on policy as new Governor Mark Carney looks to cement the economic rebound.
“Evidence is building that the economy is gradually getting back on its feet,” said Vicky Redwood, an economist at Capital Economics Ltd. in London. “The firmer signs of recovery make it all the more important that the MPC reassures the markets that interest rates will stay low even as the recovery gathers further momentum. So the committee is still likely to implement forward guidance at its next meeting.”
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"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
At the Comex silver depositories Thursday final figures were: Registered 46.95
Moz, Eligible 116.60 Moz, Total 163.55 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
First Detroit, Chicago next? We are just 30 percent
into our second decade of the 21st century, with Michigan’s largest
city filing for bankruptcy. How many more over the rest of the decade, as
borrowing costs rise for US municipalities and the baby boom generation start
to retire? How many under funded pension funds are about to wipe out cities and
towns across America? What does a municipal bond rout do to America’s private
pension funds? Sadly we are about to find out over the next two years.
"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."
Leonard Read
Analyst Meredith Whitney warns of ‘staggering’ aftershocks from Detroit bankruptcy
Michael Babad The Globe and Mail Last updated
Whitney warns on Detroit
With the first hearing today in Detroit’s bankruptcy proceedings, the Wall Street analyst who forecast banking troubles in the run-up to the financial crisis is warning of “staggering” aftershocks from the city’s collapse.
With the first hearing today in Detroit’s bankruptcy proceedings, the Wall Street analyst who forecast banking troubles in the run-up to the financial crisis is warning of “staggering” aftershocks from the city’s collapse.
“There
are five more towns like Detroit in Michigan alone,” Meredith Whitney writes in
today’s Financial Times.
“There
are many more municipalities across the country in similar positions,” she
adds.
“Detroit’s
decision last week paves the way for other elected or non-elected officials to
make decisions to save their cities and towns, decisions that probably involve
politically unpopular actions that may secure their long-term viability.”
Ms.
Whitney is well known for having predicted issues at Citigroup in 2007, though
later, in the wake of the crisis, she forecast a wave of municipal bond
defaults, which never happened.
Still,
one wonders what those who shot Ms. Whitney down might think now.
“When
U.S. banking analyst Meredith Whitney warned of problems in the $3-trillion
U.S. municipal bond market as far back as 2010 she was widely decried by most
of Wall Street for being alarmist and had been widely ridiculed for most of the
last few years; however nearly three years later her concerns look like being
very prophetic,” said senior analyst Michael Hewson of CMC Markets in London.
“It’s
probably no surprise that all those analysts who criticized her then have gone
awfully quiet given last week’s news over the city of Detroit’s finances, and
its decision to file for Chapter 9 bankruptcy.”
Ms.
Whitney is not alone in now citing the pension and debt troubles of other
cities in the wake of the biggest municipal bankruptcy in U.S. history, which
came last Thursday.
Earlier
this week, for example, chief economist David Rosenberg of Gluskin Sheff +
Associates warned that Detroit is just the “open act,” though he noted that
many of the city’s issues are unique.
Still,
that didn’t stop him from citing Chicago as the “next culprit,” though he
wouldn’t make a call on a similar bankruptcy filing, noting only the
similarities in the troubles plaguing both cities.
Ms.
Whitney, in turn, notes that city bankruptcies have been rare, but things are
different now as municipalities struggle to survive.
“As
jarring as the reality may be to accept, Detroit’s decision last week to
declare bankruptcy should not be regarded as a one-off in the U.S. municipal
market – which is what the bond-peddlers are now telling their clients,” she
writes.
“The
aftershocks of the largest municipal bankruptcy in U.S. history will be
staggering, and Detroit will set important precedents.”
More
Have a great weekend everyone. Time for a drive out
to nearby Bucklebury and Middleton country or should that be Prince Georgebury.
The monthly Coppock Indicators finished June:
DJIA: +145 Up. NASDAQ: +146 Up. SP500: +177 Unch The Fed’s
Final Bubble continues, but is struggling. The S&P500 moved sideways. The Dow and
Nasdaq both barely eked out a gain. In current highly volatile conditions and
controversial uncertain policy indecision at the Fed, Speculators would stay
long, investors would exit stocks for now or get fully hedged.
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