Monday, 18 November 2013

Dow 20,000 or Bust.

Baltic Dry Index. 1507 -10

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

“We have to understand that our economic system now is not capitalism in the sense that it used to be in the 19th Century. Now the government is directing the economy one way or another, either through budget deficits or fiat money creation or a combination of both. And right now the Fed is in the driver’s seat. And the Fed wants asset prices to go up.”

Richard Duncan. Author, former specialist at the World Bank and consultant to the IMF.

For more on the thoughts of Richard Duncan, and the new lawless age of Fedsterism, scroll down to Crooks Corner.

“The boom can last only as long as the credit expansion progresses at an ever-accelerated pace. The boom comes to an end as soon as additional quantities of fiduciary media are no longer thrown upon the loan market.”

Ludwig von Mises.

Last week, Janet Yellen, the likely next Chairman of the Federal Reserve taking over in February next year, essentially told us all not to fight the Fed. A Yellen Fed has no intention of tapering or ending ZIRP. Quite the contrary. Under Yellen, the Fed is more likely to supercharge its QE policy. First there are the spoils of the US mid-term elections to be fought over next November, after that comes the two year war to win the next Presidency.  No way is the new Fedster about to take away the punchbowl before the end of 2016.

Still as the new Fedster is all too likely to find out between now and then, neither the Fed, nor the President and the legions of bent and dodgy politicians are really in control. As Prime Minister  Harold Macmillan remarked when asked what a prime minister most feared: 'Events, dear boy, events'." Between November 2013 and November 2016, we are about to be glutted with “events.” Stay long fully paid up physical gold and silver, using the present dip as an entry opportunity. While stocks will rise until one day the Yellen supercharger goes “boom,” QE Forever on steroids, “to infinity and beyond,” can’t be forever without generating the era of a Giant Inflation as all nations rush to swap paper for anything and everything of intrinsic long term value. Unfortunately ending QE Forever or even tapering it, ends the Fed’s final bubble in a massive Great Panic, as everyone tries to get out at the top. Since the Fed will never intentionally do that, though an unintended consequence might, the sensible thing now is to prepare to protect some long term wealth for the coming age of inflation.

Up next, it’s an ill wind and all that. Capital flight from Euroland and the middle east, among others, has set off a boom in London and the greater south east. With President Hollande of France determined to turn France into the Venezuela of Europe but without oil, young and old established entrepreneurs of France are increasingly willing to brave southern and eastern England’s dubious weather and foods and lack of horsemeat, for the chance of prosperity and holding onto wealth. Now if we could just get rid of the Scots.

London Lures Billionaires as Mansions Seen as Safe Haven

By Jeremy Kahn - Nov 18, 2013 12:00 AM GMT
“We’ve had offers of around 25 million pounds, but they aren’t quite high enough,” says Noel de Keyzer, a veteran broker for Savills Plc, a London-based real estate agency. We are standing in a surprisingly sunlit subterranean family room beneath the garden of 29 Brompton Square in Knightsbridge, on the market for £27.5 million. Damien Hirst butterfly prints hang on the earth-tone walls of the recently renovated, fully furnished 1820s house.

“I would say that eight out of 10 buyers will take a house like this lock, stock and barrel, including the contents, and do very little in terms of altering the design,” de Keyzer says. By “a house like this,” de Keyzer means super-prime -- the designation given to properties asking in excess of £10 million ($16 million), Bloomberg Pursuits magazine will report in its Holiday 2013 issue

Despite the global financial crisis -- or, more accurately, because of it -- prices in the London neighborhoods of Belgravia, Chelsea, Kensington, Knightsbridge and Mayfair have risen 23 percent from their previous peak in March 2008, according to real estate brokerage Knight Frank LLP.

Since 2009, more super-prime properties have traded hands in London than in any other city, including Hong Kong, New York and Singapore; last year, the city accounted for about a third of the approximately 300 super-prime sales globally, according to research from Savills.

Fear as much as greed drives the super-prime market. Although a third of London’s super-prime buyers are British, safety-seeking internationals predominate. Oil sheiks want an Arab Spring insurance policy. Wealthy French have fled President Francois Hollande’s new tax regime.

Ultra-high-net-worth individuals from the periphery of the euro zone -- Cyprus, Greece, Italy, Portugal -- have sought to shift assets out of the besieged currency and into pounds. For Russians, de Keyzer says, “the Putin factor” -- the fear of a sudden shift in political winds -- cannot be underestimated.

Reading, Aberdeen and Edinburgh top UK cities for 'good growth'

New index of success says bigger cities such as London lose out due to high house prices and transport congestion

London may have been a powerhouse of growth in the last decade, but the capital is amongst the UK's worst cities on one measure of economic success.

The 2013 "good growth index", devised by PwC and the think tank Demos, lists Reading, Aberdeen, Edinburgh and Southampton as the best performing cities.

The report claims to give a wider measure of a city's success than just GDP, and includes job opportunities, skills, transport and work-life balance.

Top 10 cities on Good Growth Index
1. Reading and Bracknell
2. Aberdeen
3. Edinburgh
4. Southampton
5. Cambridge
6. Oxford
7. Preston
8. Bristol
9. Belfast
10. Norwich

Big cities like London, Newcastle, Liverpool and Birmingham fared less well due to congestion, high house prices, income inequality and "other quality of life indicators", the report said.

In other news this morning, bubble’s are back in favour again.

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

Asia Stocks Gain on China as Europe Futures Drop With Oil

By Glenys Sim & Emma O’Brien - Nov 18, 2013 7:41 AM GMT
Asian stocks rose after China vowed to carry out the broadest expansion of economic freedoms since at least the 1990s, while India’s rupee headed for its biggest gain in a month. European stock-index futures declined after the longest rally in 15 months, and oil fell.

---- Chinese leaders pledged to allow more private investment in state-controlled industries and expand farmers’ land rights post the Communist Party plenum meeting. In Europe, European Central Bank executive board member Yves Mersch is among 14 officials speaking at Frankfurt’s biggest finance conference which starts today, while New York Federal Reserve Bank President William C. Dudley is scheduled to appear after Chairman nominee Janet Yellen said last week she wants to maintain the central bank’s record stimulus program until the U.S. economy improves.

“The initial reaction to the Chinese communication was a negative one but as we’re getting more detail, it looks like this is a revolutionary change,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $131 billion, told Bloomberg Television. “We’re starting to get optimism coming through the market. The turnaround in sentiment and the improving macro data should push the equity market higher into 2014.”

“The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost…We conclude that under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”

Dr. Ben Bernanke

At the Comex silver depositories Friday final figures were: Registered 44.25 Moz, Eligible 124.37 Moz, Total 168.62 Moz.  

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

It’s all about stocks, stupid. To misquote the US President that set off a serial line of ever worse US Presidents.

In central banking as in diplomacy, style, conservative tailoring, and an easy association with the affluent count greatly and results far much less.

J. K. Galbraith

Richard Duncan: Fed Targeting 20,000 on the Dow

By FS Staff 11/15/2013
Richard Duncan—author, former specialist at the World Bank and consultant to the IMF—says the Federal Reserve plans to stimulate the stock market by 10-15% each year for the next two years.

“My opinion is that credit growth will remain insufficient to drive economic growth and, therefore, the Fed is going to have to continue [its efforts] through fiat money creation; and their goal is 10-15% appreciation of the stock market a year in order to create a wealth effect and push up asset prices to create consumption and to drive the U.S. and global economy,” he explained in a recent interview with Financial Sense.

If Richard’s analysis is correct, that means the Fed has a target of around 20,000 on the Dow before backing off its quantitative easing program.

----To understand how long the Fed can continue to monetize U.S. government debt and keep interest rates suppressed without major risks, Richard points to Japan, where debt to GDP is near 250%.

“Japanese government debt increased from 60% of GDP in 1990 to now where it up to almost 250% of Japan’s GDP. U.S. government debt is only 100% of US GDP. So, the US government has the potential to continue borrowing and spending easily for the next decade before it’s anywhere near the levels of Japan’s government debt at the moment. So, the government does have the ability to continue directing the economy through fiscal spending and quantitative easing so long as inflation doesn’t rear its ugly head.”

Although many people think the Fed’s efforts are undermining capitalism and free market forces, Richard says that once we severed the link between gold and the dollar under Nixon, capitalism was no longer the force driving economic growth. Now, he says, we have “Creditism.”

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

Ludwig von Mises.

The monthly Coppock Indicators finished October:
DJIA: +178 Up. NASDAQ: +238 Up. SP500: +217 Up. The Fed’s final bubble continues to grow, until QE Forever isn’t forever. Up will remain up, until one fine day out of the blue the Fed finally loses control, or the next Lehman hits.

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