Thursday, 12 September 2013

The Fed’s Russian Roulette.

Baltic Dry Index. 1628 +87

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

When I couldn’t play according to my system, which was based on study and experience, I went in and gambled. I hoped to win, instead of knowing that I ought to win on form.

Jesse Livermore.

As we all await next week’s Russian roulette Federal Reserve meeting, the one with the potential to make much of the rest of the world “drop dead,” Europe’s never ending crisis is growing again, while China Premier says that China’s rebound isn’t “solid.” At next week’s Fedster meeting, the Fedster’s are playing God with the fate of the BIC part of the BRICs, and all of Club Med including France. If the Bernanke Fed sets off a global interest rate spike, billions all over the world will know who to blame. I don’t think that the Fed will dare to taper. The “Bernank” will punt one last time, leaving it to his replacement to get the blame for crashing the Great Nixonian Error of fiat money.

But if I’m wrong, and the Fed starts the process of kicking off the Great Interest Rate bull market, there will be blood in the streets on all continents. Though they don’t ring a bell at the top, it’s bunker time for this old dinosaur trader. Bet on certainties, not on 50:50 outcomes with the cronies tipped off.

There is nothing like losing all you have in the world for teaching you what not to do.

Jesse Livermore.

France and Portugal to miss deficit targets

France will post weaker growth in 2014 and miss its deficit target this year, the country’s finance minister has said, as the government announced €15bn (£12.6bn) of “unprecedented” spending cuts to get the economy back on track.

Pierre Moscovici said the government now expected France to grow by 0.9pc in 2014, from a previous prediction of 1.2pc. The government maintained its prediction for 0.1pc growth this year.

Mr Moscovici said yesterday that France’s 2013 public deficit would now come in at 4.1pc percent of GDP - higher than the 3.9pc agreed with the European Union. He said that France was on track to post a deficit of 3.6pc in 2014, and push it back under the EU ceiling of 3pc of GDP in 2015, in line with a two-year extension granted by Brussels in May.

French president Francois Hollande warned in June that France could miss its deficit target due to poor growth and dwindling tax revenues.

Jean-Marc Ayrault, the country’s prime minister, said there would be “unprecedented” cuts of €15bn in the 2014 budget - €1bn more than previously indicated.

----Budget minister Bernard Cazeneuve said an additional €3bn would be generated by raising taxes, though the government resisted calls to raise revenues by €6bn. Mr Moscovici insisted there would be no increases in employer payroll or household tax contributions.

Portugal also pleaded with Brussels yesterday to ease its 2014 public deficit reduction target from 4pc to 4.5pc of GDP, though deputy prime minister Paulo Portas said it was no secret that the country had clashed with international creditors on it deficit target during the country’s latest financial healthcheck.

Li Says China Rebound Not Yet on Solid Foundation

By Bloomberg News - Sep 12, 2013 3:19 AM GMT
Chinese Premier Li Keqiang said the foundations of a growth rebound aren’t solid while cautioning that stimulus won’t help resolve deep-rooted issues in the world’s second-largest economy.

“The foundation of an economic recovery is not solid yet with many uncertain factors,” Li said in a speech yesterday at the World Economic Forum in Dalian, China. The nation is taking steps to stabilize growth and can achieve the main economic targets this year, Li said

Policy makers have signaled they will defend a 7.5 percent expansion goal for 2013 and seek to ensure a pace of 7 percent in the coming years. Li pledged reforms that will ripple throughout the financial system as Communist Party leaders prepare for a November meeting to lay out a blueprint for sustaining long-term growth.

“An important part of economic-system reform is financial reform,” Li said in a question-and-answer session after the speech. “It is because it is such a complicated systematic project, it indicates China’s reform has entered a deep-water zone, or the most difficult phase.”

Li reiterated that China will push forward interest-rate and exchange-rate reforms and the internationalization of the yuan while promoting the currency’s convertibility under the capital account

In other global stock bubble news, as we await next week’s details of the outcome of the Fed’s Russian roulette, the Great Disconnect is making some people nervous. Getting out early beats getting out late, though some never get out at all. If old “loose lips, helicopter Ben” is serious about grounding the helicopters next week, look out for a blood bath in the Great Disconnect. Are the savvy crony insiders already cashing out?

In a bull market your game is to buy and hold until you believe that the bull market is near it’s end. To do this you must study general conditions and not tips or special factors affecting individual stocks. Then get out of all your stocks; get out for keeps!

Jesse Livermore.

Emerging Stocks Seen Overbought as Jump Spurs Brazil Bull

By Ash Kumar, Maria Levitov & Julia Leite - Sep 12, 2013 4:38 AM GMT
The biggest rally in developing-nation stocks in a year is showing signs of reversing to analysts following technical indicators.

The MSCI Emerging Markets Index rose for six straight days by a total 6.2 percent, the most for the period since September 2012, as prospects for an imminent U.S. strike on Syria eased and economic data for China improved. The relative strength index for the gauge reached 69.9 -- approaching the threshold of 70 that signals a security is poised to decline -- for the first time since Jan. 14. That level preceded an 18 percent slump in five months.

While developing shares advanced 12 percent since reaching their 2013 low in June and Brazil’s Ibovespa entered a bull market this week, shares are still down 6 percent this year through yesterday. The MSCI gauge is headed to its biggest annual underperformance since 1998 versus the developed-nation index, which is up 15 percent in 2013. Emerging-market stocks traded at 10.6 times estimated earnings on Sept. 10, the highest since May.

“Investors are pausing for a breather,” Joseph Dayan, the London-based head of markets at BCS Financial Group, the biggest trader of stocks in the Moscow Exchange, said by e-mail. “There is not much more than that at this point.”

The MSCI Emerging Market Index breached the upper boundary of its Bollinger band on Sept. 10, another technical indicator signaling it could be due for a reversal, data compiled by Bloomberg show. The developing-nations gauge rose 0.3 percent to 995.28 at 11:27 a.m. in Hong Kong.

KKR Joining $5 Billion Surge in Dividend Loans: Australia Credit

By Paulina Duran - Sep 12, 2013 3:30 AM GMT
Private equity firms are joining a global borrowing surge to draw dividends from their Australian investments, prompting the nation’s banks to compete against U.S. lenders for the business.

Pacific Equity Partners Pty is talking to financiers here and in the U.S. as it seeks a fifth loan this year to refinance and extract cash from the Sydney-based fund’s investments. KKR & Co. (KKR) is tapping banks in Australia to borrow A$300 million against its medical business Genesis Care Pty to help pay itself a dividend. There have been about $5 billion of such loans in the nation in 2013, according to data compiled by Bloomberg.

Private owners of Australian companies, from PEP to TPG Capital, are capitalizing on favorable debt markets to return cash to themselves, even as some consider stake sales that would end their responsibility for those businesses. Local banks are striving to maintain lending business in the face of competition from the $2 trillion U.S. high-yield market, where so-called covenant-lite debt is tied to a rate at least 200 basis points lower than the South Pacific nation’s benchmark.

“What the banks seem to be doing is to compete more aggressively for what they perceive as limited growth opportunities,” said Brian Johnson, a Sydney-based bank analyst with CLSA Ltd. “I certainly see credit underwriting standards at the moment being loosened. Quantitative easing has lowered interest rates around the globe and that fuels all sorts of excesses.”

Loans that fund payouts are surging as firms borrow cheaply against investments to pay themselves rather than sell assets at a time when merger and acquisition activity is slowing. While high-yield loans borrowed in the U.S. for buyouts have fallen by more than two-thirds since 2008, dividend loans have risen almost ten-fold, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.

We close for the day with a new bribery scandal gaining legs. In our new lawless age, I suspect we are going to hear a lot more about the local customs involved in doing business in Guinea. Banging up miners, is a whole lot easier than banging up the Fedsters and banksters who almost brought down the global financial system in 2007-2008, and might yet succeed when the Fed’s final bubble meets up with its pin. Taper anyone? Next week you say.

Billionaire Steinmetz’s Home Said to Be Raided by Police

By Jesse Riseborough & Andy Hoffman - Sep 11, 2013 11:31 PM GMT
The Geneva home of Beny Steinmetz, the billionaire natural-resources investor who is Israel’s richest person, was raided by Swiss police, according to a person familiar with the matter.

The raid was ordered by Geneva’s public prosecutor following a request by the government of Guinea and occurred within the last two weeks, said the person, who was briefed on the matter and asked not to be identified as the investigation is confidential. No documents were taken away, the person said.

Steinmetz, 57, has a net worth of $7.4 billion, according to the Bloomberg Billionaires Index. BSG Resources Ltd., his mining company, owns a 51 percent stake in the Simandou iron ore deposit in Guinea. The West African country is reviewing mining licenses including Simandou’s. In April, a U.S. grand jury investigation began into claims that bribes were paid by BSG Resources for mining rights in Guinea.

----Geneva’s public prosecutor said last month it opened an investigation into Onyx Financial Advisors U.K. at the request of Guinea. Swiss police last month raided the Geneva offices of Onyx, a London-based company whose chief executive officer, Dag Cramer, is a director of BSG Resources.

Onyx “provided the Swiss authorities with information following a request to Switzerland by the Government of Guinea,” said in an Aug. 29 statement.

Frederic Cilins, a French citizen who says he has worked for BSG Resources in Guinea, was denied bail in July while awaiting trial on charges he interfered with the U.S. grand jury probe. He’s charged with witness tampering, obstructing a criminal investigation and destruction of evidence in a federal investigation. The witness-tampering and record-destruction charges carry maximum prison terms of 20 years.

Cilins said he was arrested after trying to stop an extortion attempt by the government’s main witness. He has pleaded not guilty.

One of the most helpful things that anybody can learn is to give up trying to catch the last eight – or the first. These two are the most expensive eights in the world. They have costs stock traders, in the aggregate, enough millions of dollars to build a concrete highway across the continent.

Jesse Livermore.

At the Comex silver depositories Wednesday final figures were: Registered 42.25 Moz, Eligible 119.11 Moz, Total 161.36 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.

Today, more news from the land chosen to host the 2020 Olympics. Apart from leaking an estimated 300 tons of irradiated water a day into the Pacific Ocean, TEPCO’s US advisor says that the stored 338,000 tonnes of irradiated water will have to go there too, after somehow it’s been remediated to an acceptable standard. What’s the odds that it goes there largely as is, either when the next earthquake hits and the tanks rupture, or if we’re lucky once only the radioactive tritium is left in the water after most of everything else has been filtered out.

It might be unwise for any of the athletes attending the 2020 Olympics in Tokyo, to order the sushi. Then again it may be unwise to show up at all.

Tepco Adviser Promoted Fukushima Water Dump to Ocean in Op-Ed

By Jacob Adelman - Sep 12, 2013 4:38 AM GMT
Irradiated water at Tokyo Electric Power Co. (9501)’s Fukushima plant will probably have to be dumped into the ocean after contamination is brought to safe levels, an adviser to the company’s water management task force said.

The ocean release will be necessary because water can’t be stored in tanks indefinitely at the Dai-Ichi station after being used to cool the plant’s overheating reactor fuel, Lake Barrett, a former official with the U.S. Nuclear Regulatory Commission, wrote in a Sept. 9 opinion piece posted on the website of the Bulletin of Atomic Scientists.

The article by Barrett, who’ll be advising the utility known as Tepco on water management at the site, could offer clues to its strategy for handling the 338,000 metric tons of contaminated water stored in more than 1,000 tanks at the plant. That amount is increasing by about 400 tons a day.

“Spending billions and billions of yen on building tanks to try to capture almost every drop of water on the site is unsustainable, wasteful, and counterproductive,” Barrett wrote. “I see no realistic alternative to a program that cleans up water with improved processing systems so it meets very protective Japanese release standards and then, after public discussion, conducts an independently confirmed, controlled release to the sea.”

Tepco set up the Contaminated Water and Tank Countermeasures Headquarters last month after reporting a 300 ton leak at one of the tanks, which Japan’s Nuclear Regulation Authority designated as the worst accident since the March 2011 earthquake and tsunami caused meltdowns at the site. The company is also struggling to stem the leak of contaminated groundwater into the Pacific Ocean, which the government has estimated at about 300 tons per day.

As money got tighter call-money rates went higher and prices of stocks lower.

Jesse Livermore.

The monthly Coppock Indicators finished August:
DJIA: +162 Down. NASDAQ: +189 Up. SP500: +194 Down. Two red flags. Only the “stock market for the next hundred years,” remains optimistic.

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