Baltic Dry Index. 1007 +11
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
With QE forever and ZIRP, the central banksters’
final bubble continues apace. In the lawless casino economy of the 21st
century, savers and thrift are punished; a fiat currency race to the bottom is
well underway. With the Bernanke-BOE put underwriting stocks and property,
everyone and their dog with cash or able to borrow, is back in the 2013 casino.
It is tulip-mania all over again. Tomorrow’s millionaires are being minted
today. What could possibly go wrong?
Of course tulip-mania can’t last forever, but
everyone will be smart enough to get out before the Fed and fiat currency
fails. Stay long physical precious metals for the next set of Madoff’s. Bad
things start to happen after Chancellor Merkel’s re-elected on September 22.
The real interest rate is probably minus 2% in the
world today. It should be in line with the per capita income growth rate or 1%.
The difference is 3%.
This environment redistributes wealth from savers
to debtors on a scale of over $2 trillion per annum or $55 billion per day.
This must be the biggest legal robbery ever in human history. But it is always
coded in arcane academic lingos spoken by respected central bankers with
impeccable CVs. All that is just packaging; it is robbery nevertheless.
Andy
Xie
Investors euphoric as US margin debt reaches 'danger' levels
Fund managers are around the world are gripped by euphoria, convinced that America is in full recovery and Europe has overcome its debt crisis.
Bank of
America’s monthly survey of investors showed a dramatic rise in confidence in
August, with a net 72pc expecting growth to accelerate over the next year. It
is the highest in reading since 2009.
Almost
everybody expects bond yields to rise as deflation fears evaporate, with just
3pc still worried about the risk of an economic relapse. Managers have slashed
their bond allocation to a 28-month low.
The
survey is watched by veterans as a "contrarian indicator", tracking
herd mentality at key moments. Michael Hartnett, the bank’s investment
strategist, advised clients to take the opposite trade and buy US Treasury
bonds.
The
exuberant mood comes as margin debt on Wall Street hovers near $377bn, just
below its all-time high and well above peaks before the dotcom crash and the
Lehman crisis.
“Investors
have rarely been more levered than today,” said Deutsche Bank, warning that the
spike in margin debt is a “red flag” and should be watched closely.
The bank
described this form of debt as “a tool used by stock speculators to borrow
money from brokerages to buy more stock than they could otherwise afford on
their own. If the stock rises, they end up making far more money. If the stock
crashes, the opposite materialises. This kind of speculation is highly
alarming.”
The bank
warned that forced sales of stocks can set off panic and a rush for exits,
snowballing into a crash, as happened in 1929. It said the equity rally may
have further legs but it cited “astonishing similarities” between the latest
patterns and events preceding prior market crises.
---- Andrew Lapthorne from Societe Generale said the rush for leverage is a classic sign of a credit cycle near exhaustion. “Profits have been ticking along at stall speed just as in 2006 and 2007, and just like then people are resorting to leverage to squeeze out the last dime,” he said.
Mr
Lapthorne said the new twist is that US profits have begun to stall as well,
with cash flow growth falling from double-digit rates to zero.
He said
the rise in margin debt is matched by leveraged excess across the system, with
debt-driven buy-backs of corporate shares running at a $400bn annual rate.
Leveraged buy-outs are back in vogue. Junk bond yields are near record lows.
More
Below, a lesson for Bernocchio from Schrodinger’s
cat. The US economy is alive and well at escape velocity requiring a “taper,”
or it isn’t, requiring QE forever and ZIRP to eternity. But which is it? Getting it wrong ends the Fed’s
final bubble. One outcome is a stock market crash, a bond market crash, and
financial ruin. The other outcome is the giant inflation of all giant
inflations, and fiat currency revulsion. With QE hardly working anymore, and a
world awash in mountains of QE forever and hooked on ZIRP to eternity, is
Bernocchio’s cat alive or dead?
Schrödinger’s Cat explained
We all think we know Schrödinger’s Cat is both dead and alive when inside the box. But what does this famous thought experiment really mean?
Erwin Schrödinger, the Austrian quantum physicist, has been celebrated in a Google Doodle which depicts his most widely-known contribution to the field: the Schrödinger’s Cat mind experiment.In the hypothetical experiment, which the physicist devised in 1935, a cat is placed in a sealed box along with a radioactive sample, a Geiger counter and a bottle of poison.
If the Geiger counter detects that the radioactive material has decayed, it will trigger the smashing of the bottle of poison and the cat will be killed.
The experiment was designed to illustrate the flaws of the ‘Copenhagen interpretation’ of quantum mechanics, which states that a particle exists in all states at once until observed.
If the Copenhagen interpretation suggests the radioactive material can have simultaneously decayed and not decayed in the sealed environment, then it follows the cat too is both alive and dead until the box is opened.
Common
sense tells us this is not the case, and Schrödinger used this to highlight the
limits of the Copenhagen interpretation when applied to practical situations.
The cat is actually either dead or alive, whether or not it has been observed.
“[It]
prevents us from so naively accepting as valid a "blurred model" for
representing reality,” Schrödinger wrote. “In itself, this would not embody
anything unclear or contradictory.”
Schrödinger’s
Cat has been used to illustrate the differences between emerging theories in
quantum mechanics, by testing how they would approach the experiment.
More
Below, the case for Bernocchio’s cat being alive.
Get ready for the bond and pension rout of all times.
“When the music stops, in terms of liquidity, things will be
complicated. But as long as the music is playing, you’ve got to get up and
dance. We’re still dancing.”
Chuck Prince. Former CEO of Citigroup.
German Economy Grows More Than Forecast Boosting Recovery
By Jeff Black - 2013-08-14T06:10:16Z
The German economy expanded more
than economists predicted in the second quarter, helping a fledgling recovery
in the euro area. Gross domestic product rose 0.7 percent from the first quarter, when it stagnated, the Federal Statistics Office in Wiesbaden said today. Economists forecast a gain of 0.6 percent, according to the median of 47 estimates in a Bloomberg News survey.
---- “It’s good news for Europe to see
Germany growing again,” said Anatoli Annenkov, senior economist at Societe
Generale SA in London.
“As uncertainty over the debt crisis eases, the German economy is daring to
take more decisions on investment. But we still think in the autumn we’ll see
more strains from the fragmentation in the euro area.”
More
French Economy Posts Best Quarter Since Hollande Took Power
By Mark Deen - Aug 14, 2013 6:30 AM GMT
The French economy posted its best quarterly expansion since President Francois
Hollande came to power in May 2012 as export demand lifted factory output. Gross domestic product grew 0.5 percent in the three months through June, after shrinking in the two previous quarters, national statistics office Insee said in an e-mailed statement today in Paris. The median forecast of 26 economists surveyed by Bloomberg was a 0.2 percent expansion.
More
Europe Growing Again Means Boost for Global Economy
By Simon Kennedy - Aug 13, 2013 3:37 PM GMT
The euro
area is turning into more of a help than a hindrance for the world economy.
With data
this week predicted to show the 17-nation bloc is growing again after an
unprecedented six quarters of crisis-driven contraction, economists from
Barclays Plc to JPMorgan Chase & Co. say such stabilization will restore
the region as a prop, if not a powerhouse, for international demand and
financial markets.
More
Treasuries Fall Second Day as Sales Data Fuel Bets Fed to Taper
By Susanne Walker - Aug 13, 2013 10:16 PM GMT
Treasuries dropped the most in more than a week as U.S. retail sales
increased for a fourth month, adding to speculation the economy is
strengthening enough for the Federal
Reserve to reduce its bond-buying program. The yield gap between Treasury five- and 10-year notes widened to almost the most in two years after the Commerce Department said retail sales rose 0.2 percent in July. Fed Bank of Atlanta President Dennis Lockhart, who has backed the $85 billion in monthly purchases, said policy makers may start to slow buying at any of their next three gatherings amid “uneven performance” by the economy. They next meet Sept. 17-18.
More
We end for the day with more fallout from Snowy.
Has America really agreed a no spying pact with Germany? Who would believe them
even if they did? Germany’s Ronald Pofalla forgets the first rule about holes.
Oh
what a tangled web we weave,
When first we practise to deceive!
When first we practise to deceive!
Sir
Walter Scott.
Troubling Questions: No-Spy Pact Backfires on Berlin
Chancellery chief Ronald
Pofalla's appearance before a parliamentary committee on Monday was supposed to
pacify public misgivings in the wake of the NSA spying scandal. But his
announcement of a German-American no-spying agreement raised far more questions
than it answered.
----
Pofalla appeared before the committee to clear the air. Chancellor Angela
Merkel's conservatives hope to finally put a lid on the NSA scandal, which was
set off by reports leaked by whistleblower Edward Snowden. The core of Pofalla's message was
simple: The American intelligence agency and its British counterpart adhere to
German law and have agreed in writing to do so. Pofalla went on to say that the
rights of millions of Germans have not been violated, ostensibly in response to
recent criticism by the opposition Social Democrats. The data that the
Bundesnachrichtendienst (BND), Germany's foreign intelligence agency, has
handed over to America's National Security Agency pertained to reconnaissance
abroad and not to German citizens, he assured the panel.
It was a peculiar sort of political spectacle. Merkel's chief of staff and the government's official intelligence coordinator praised the "hard work" of the agency and quoted written assurances made recently by the American and British intelligence agencies to the German government. Pofalla painted a picture of a harmonious world of German-American intelligence cooperation. And it's this collaboration, he said, that has prevented terrorist attacks on German and US soldiers in Afghanistan.
If you subscribe to Pofalla's version of events, all the recent fuss is actually superfluous.
Only, there's a hitch in this rosy scenario. The BND and the NSA have agreed on pursuing a brand-new "no-spy pact." The agreement, says Pofalla, represents a unique opportunity to set standards for the future work of Western intelligence agencies.
---- Yet the establishment of such a no-spying agreement implies that espionage has been allowed up to now, an unwitting confirmation of the information in the documents leaked by Snowden -- including the internal paper that SPIEGEL reported on this week: As a target of espionage, Germany ranks somewhere in the middle of the priority list, about on par with France and Japan. In the leaked document, the US notes a particular interest in Germany's foreign policy and economic situation, citing threats to the financial system and "economic stability" as high-priority subjects of interest when it comes to spying in the European Union.
The no-spying agreement isn't likely to make the NSA
scandal disappear. On the contrary, Berlin will be faced with new questions:
What should comprise such a pact? Will it only pertain to the work of foreign
intelligence agencies? Or will it address the interests of citizens whose
Internet data flow through American servers and can potentially be captured and cached?
None of this has been definitively answered, all written assurances to the
contrary.
More
Wealth, in even the most improbable cases, manages to convey the
aspect of intelligence.
J. K.
Galbraith.
At the Comex silver depositories Tuesday final figures were: Registered 39.71 Moz,
Eligible 124.78 Moz, Total 164.49 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the coming Novemner event that could change
our world forever. Why mankind is not yet ready for nuclear power. Existing
technology simply isn’t up to the job of containment and remediation when human
error gets it wrong. Come November, thanks to Japan’s Tepco, we will all be playing Russian roulette for
about a year.
All the waste in a year from a nuclear power plant can be stored
under a desk.
Ronald Reagan.
Insight: After disaster, the deadliest part of Japan's nuclear clean-up
TOKYO |(Reuters) - The operator of Japan's crippled Fukushima nuclear plant is preparing to remove 400 tons of highly irradiated spent fuel from a damaged reactor building, a dangerous operation that has never been attempted before on this scale.
Containing radiation equivalent to 14,000 times the amount released in the atomic bomb attack on Hiroshima 68 years ago, more than 1,300 used fuel rod assemblies packed tightly together need to be removed from a building that is vulnerable to collapse, should another large earthquake hit the area.
Tokyo Electric Power Co (Tepco) is already in a losing battle to stop radioactive water overflowing from another part of the facility, and experts question whether it will be able to pull off the removal of all the assemblies successfully.
"They are going to have difficulty in removing a significant number of the rods," said Arnie Gundersen, a veteran U.S. nuclear engineer and director of Fairewinds Energy Education, who used to build fuel assemblies.
The operation, beginning this November at the plant's Reactor No. 4, is fraught with danger, including the possibility of a large release of radiation if a fuel assembly breaks, gets stuck or gets too close to an adjacent bundle, said Gundersen and other nuclear experts.
That could lead to a worse disaster than the March 2011 nuclear crisis at the Fukushima plant, the world's most serious since Chernobyl in 1986.
No one knows how bad it can get, but independent consultants Mycle Schneider and Antony Froggatt said recently in their World Nuclear Industry Status Report 2013: "Full release from the Unit-4 spent fuel pool, without any containment or control, could cause by far the most serious radiological disaster to date."
Tepco has already removed two unused fuel assemblies from the pool in a test operation last year, but these rods are less dangerous than the spent bundles. Extracting spent fuel is a normal part of operations at a nuclear plant, but safely plucking them from a badly damaged reactor is unprecedented.
"To jump to the conclusion that it is going to work just fine for the rest of them is quite a leap of logic," said Gundersen.
The utility says it recognizes the operation will be difficult but believes it can carry it out safely.
Nonetheless, Tepco inspires little confidence. Sharply criticized for failing to protect the Fukushima plant against natural disasters, its handling of the crisis since then has also been lambasted.
----The fuel assemblies are in the cooling pool of the No. 4 reactor, and Tepco has erected a giant steel frame over the top of the building after removing debris left behind by an explosion that rocked the unit during the 2011 disaster.
The structure will house the cranes that will carry out the delicate task of extracting fuel assemblies that may be damaged by the quake, the explosion or corrosion from salt water that was poured into the pool when fresh supplies ran out during the crisis.
The process will begin in November and Tepco expects to take about a year removing the assemblies, spokesman Yoshikazu Nagai told Reuters by e-mail. It's just one installment in the decommissioning process for the plant forecast to take about 40 years and cost $11 billion.
Each fuel rod assembly weighs about 300 kilograms (660 pounds) and is 4.5 meters (15 feet) long. There are 1,331 of the spent fuel assemblies and a further 202 unused assemblies are also stored in the pool, Nagai said.
More
In any great organization it is far, far safer to be wrong with
the majority than to be right alone.
J. K. Galbraith.
The monthly Coppock Indicators finished July:
DJIA: +164 Up. NASDAQ: +167 Up. SP500: +195 Up. The
Fed’s final bubble still inflates.
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