Thursday, 28 November 2013

Great Disconnect Not A Bubble!

Baltic Dry Index. 1573 +61

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

Note: The next LIR update will be on Monday.

“I know you think you understand what you thought I said, but I'm not sure you realize that what you heard is not what I meant”

Alan “Bubbles” Greenspan.

From fallen guru “Bubbles” Greenspan’s lips to God’s ears, we’re not in a bubble says the serial bubble-meister of the 80s, 90s and noughties. Not that he ever saw a bubble of course, and said that he couldn’t do anything about them even if he could see one, which he never did. Is the Great Disconnect about to end? We open this Thanksgiving Day with “Bubbles” on bubbles. It’s enough to make “God’s worker” Ebenezer Squid choke on his turkey.

I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said.

Alan “Bubbles” Greenspan.

Former Fed Chief Greenspan Sees No Bubble as Dow Exceeds 16,000

By Joshua Zumbrun - Nov 28, 2013 5:00 AM GMT
Former Federal Reserve Chairman Alan Greenspan said the U.S. economy probably will grow more slowly next year than some forecasters predict and indicated that a record U.S. stock market isn’t in a bubble.

“This does not have the characteristics, as far as I’m concerned, of a stock market bubble,” Greenspan said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “It could come out that way but I don’t see it at this stage.”

Greenspan said that even with the rise in equities, the U.S. economy is restrained by a “degree of uncertainty” that is reducing investment. Economists who forecast 2.5 percent to 3 percent growth next year may be too optimistic, he said.

---- Greenspan said the economy is being held back in part by the banking system, as some of the largest banks are not operating efficiently.

 “We’re supporting banking institutions who are not only very large, but not very efficient and they are using the scarce savings of the society, which is critical for economic growth,” he said. He declined to identify which banks had become inefficient.

While we all give thanks today for “Benny and the QE Forever gang” cranking out socialism for banksters, today we note some signs of rising international distress.

To succeed, you will soon learn, as I did, the importance of a solid foundation in the basics of education - literacy, both verbal and numerical, and communication skills.

Alan “Bubbles” Greenspan.

Fed Reveals New Concerns About Long-Term U.S. Slowdown

By Rich Miller - Nov 27, 2013 4:03 PM GMT
Federal Reserve Chairman Ben S. Bernanke and his colleagues are suffering through their own form of cognitive dissonance: revealing new concerns about the economy’s long-term prospects even as they forecast faster growth in 2014.

Worker productivity, a key component of an economy’s health, has risen at an annual clip of 1 percent during the last four years, as the U.S. has struggled to recover from the worst recession since the Great Depression. That’s less than half the 2.2 percent average gain since 1983, according to data from the Labor Department in Washington.

“Slower growth in productivity might have become the norm,” the central bankers noted at their Oct. 29-30 meeting, according to the minutes released last week. That’s a switch from past comments by Bernanke that the deceleration probably was temporary and would end as the expansion continued.

Singapore’s Home-Price Decline Accelerates After Curbs

By Jasmine Ng - Nov 28, 2013 5:50 AM GMT
Singapore’s home-price decline accelerated in October, falling 1.2 percent from the previous month, adding to evidence that the government’s efforts to cool the property market are working.

The city-state’s residential property index fell to 159.1 points last month after declining a revised 0.9 percent in September, according to the National University of Singapore’s Singapore Residential Price Index. The measure tracking prices in the central region decreased 1.4 percent in October.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the city-state to introduce new taxes and higher minimum down-payments since 2009 to curb speculation in Asia’s second-most expensive housing market. Home sales have been falling in the past four months after the government imposed new rules in June governing how financial institutions grant property loans to individuals.

----Home sales fell 19 percent in October to 1,009 units from a month ago, according to data from the Urban Redevelopment Authority released Nov. 15. From the previous year, sales dropped 48 percent, the data showed.

Rupiah Weakens Beyond 12,000 a Dollar for First Time Since 2009

By Yudith Ho - Nov 28, 2013 6:30 AM GMT
Indonesia’s rupiah fell beyond 12,000 per dollar for the first time since 2009 after a failed debt sale added to concern fund inflows are slowing on the prospect of a cut in stimulus by the Federal Reserve.

The currency touched 12,020 per dollar, the weakest since March 2009, before trading 0.9 percent down at 11,990 per dollar as of 1:25 p.m. in Jakarta, prices from local banks show. It slid 2.5 percent this week. In the offshore market, one-month non-deliverable forwards dropped 0.1 percent to 11,945 per dollar, data compiled by Bloomberg show.

U.S. jobless claims unexpectedly fell last week, data showed yesterday, after the Fed said it might reduce bond purchases “in coming months” should the economy improve as anticipated. The rupiah’s recent decline is due to external factors and increased dollar demand toward the end of the month, Bank Indonesia Governor Agus Martowardojo said yesterday. The nation raised $190 million at its debut domestic dollar bond offer on Nov. 25, short of the $450 million goal.

Broom-Waving Voters Aim to Sweep Away India’s Elite

By Bibhudatta Pradhan & Andrew MacAskill - Nov 28, 2013 5:05 AM GMT
For India, Arvind Kejriwal is an unusual politician: he doesn’t use a police escort, he won’t field candidates who face murder charges and he publishes the names of those who contribute to his party’s funds.

Kejriwal’s campaign against corruption is resonating with voters in New Delhi, shaking up the dominance of the country’s two main political groups and threatening to end the Congress party’s 15-year rule of the city. Some opinion polls show his year-old Aam Aadmi Party may win a third of the seats in a Dec. 4 election, enough to make him the capital’s kingmaker.

“His party is transparent and trying to be different on sources of funding, campaigning and fielding of candidates,” said Bhaskara Rao Gorantala, research director at the National Social Watch in New Delhi, which analyzes governance. “Look at the other big parties -- can you find out from where they are getting money to spend so much in elections? Impossible.”

Kejriwal is tapping rising public anger over the corruption Indians face in their daily lives and charges of graft that reach to the heart of Prime Minister Manmohan Singh’s cabinet. The Delhi poll is one of five state elections between Nov. 11 and Dec. 4 that cover almost a sixth of India’s population. The results on Dec. 8 will show how far support has slid for the ruling Congress party, which faces a general election by May.

Merkel Refuseniks Determined to Head Off Grand Coalition

By Birgit Jennen - Nov 27, 2013 11:00 PM GMT
Franz-Josef Drabig is doing all he can to wreck Germany’s next government before it’s formed.
Drabig, a Social Democratic Party district official in the coal and steel town of Dortmund, is part of a groundswell in the SPD against a coalition with Chancellor Angela Merkel. He says he’ll reject a joint platform completed yesterday and a majority of Dortmund SPD members will join him in voting “No” in a binding party referendum.

“We’ve decided against a grand coalition,” Drabig, 58, said in an interview in Dortmund, the largest city in the industrial Ruhr region, where he and two deputies are visiting 50 of the 76 local SPD chapters to lobby against signing on as Merkel’s junior partner. “We don’t want to just be Merkel’s means of achieving a majority.”

U.K. Recovery Seen at Risk as Rebalancing Eludes Economy

By Eshe Nelson - Nov 28, 2013 12:01 AM GMT
Britain’s consumer and housing-driven recovery, the fastest among Group-of-Seven nations, risks losing steam unless export growth picks up, economists said.

While the economy grew the fastest in more than two years in the three months through September, the expansion was led by consumer spending, construction and stock building. Net trade knocked 0.9 percentage point off GDP, the most since the second quarter of 2011.

Bank of England Governor Mark Carney this week extolled the strength of the economy’s revival, while acknowledging that weak growth in the euro area may weigh on the export outlook and limit rebalancing of the economy. Part of the domestic demand is linked to a revival in the housing market, which has fueled concerns of a brewing bubble. Carney will address those risks at a press conference in London today.

We end with just a normal trade dispute, or China pushing back against President Obama’s “Glasgow kiss” over China’s newly declared air-defence identification zone? If the latter, just the first of many more travails to come I suspect.

China May Delay U.S. Corn Buying as Cargo Held, Shanghai JC Says

By Bloomberg News - Nov 27, 2013 9:55 AM GMT
Corn shipments to China from the U.S. may be delayed after authorities in southern Guangdong province this month rejected and held a cargo containing an unapproved variety, Shanghai JC Intelligence Co. said.

Domestic buyers and global suppliers may refrain from signing agreements because they don’t know whether the government will stop more cargoes, said Li Qiang, chairman of the Shanghai-based researcher.

Inspectors at Shekou port rejected a 60,000-metric-ton shipment of U.S. corn containing the MIR 162 variety developed by Syngenta AG (SYT), which hasn’t been approved by the Ministry of Agriculture, China National Grain & Oils Information Center said on Nov. 20. Delaying purchases may hurt corn prices in Chicago, which traded near a three-year low after U.S. farmers gathered a record harvest.

U.S. affirms support for Japan in islands dispute with China

By Mark Felsenthal and David Alexander WASHINGTON Thu Nov 28, 2013 2:14am EST
(Reuters) - The United States pledged support for ally Japan on Wednesday in a growing dispute with China over islands in the East China Sea and senior U.S. administration officials accused Beijing of behavior that had unsettled its neighbors.

U.S. Defense Secretary Chuck Hagel assured his Japanese counterpart in a phone call that the two nations' defense pact covered the small islands where China established a new airspace defense zone last week and commended Tokyo "for exercising appropriate restraint," a Pentagon spokesman said.

China's declaration raised the stakes in a territorial standoff between Beijing and Tokyo over the area, which includes the tiny uninhabited islands known as the Senkaku in Japan and the Diaoyu in China. 

The United States defied China's demand that airplanes flying near the islands identify themselves to Chinese authorities, flying two unarmed B-52 bombers over the islands on Tuesday without informing Beijing.

It was a sharp reminder to China that the United States still maintains a large military presence in the region despite concerns among U.S. allies that President Barack Obama's "pivot to Asia" strategy has borne little fruit.

---- The Pentagon signaled that more military flights into the defense zone claimed by China can be expected.

History has not dealt kindly with the aftermath of protracted periods of low risk premiums.

Alan “Bubbles” Greenspan.

At the Comex silver depositories Wednesday final figures were: Registered 44.30 Moz, Eligible 126.27 Moz, Total 170.57 Moz.  

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

Today does history repeat? The new arms war underway between China and Japan, might be a great stimulus for the world economy, according to AEP at the UK’s Daily Telegraph. At least as long as they don’t actually bomb or break anything.  With America issuing “a blank cheque” to its unrepentant militarising ally Japan, my money’s on someone breaking something PDQ. With a little luck, Europe and the UK get a pass on this one.

“God created war so that Americans would learn geography.”

Mark Twain.

China-Japan rearmament is Keynesian stimulus, if it doesn't go horribly wrong

By Ambrose Evans-Pritchard Economics Last updated: November 26th, 2013
Asia is on the cusp of a full-blown arms race. The escalating clash between China and almost all its neighbours in the Pacific has reached a threshold. All other economic issues at this point are becoming secondary.

Beijing's implicit threat to shoot down any aircraft that fails to adhere to its new air control zone in the East China Sea is a watershed moment for the world. The issue cannot easily be finessed. Other countries either comply, or they don't comply. Somebody has to back down.

The gravity of the latest dispute should by now be obvious even to those who don't pay attention the Pacific Rim, the most dangerous geostrategic fault line in the world.

Japan’s foreign minister, Fumio Kishida, accused China of “profoundly dangerous acts that unilaterally change the status quo”.

The US defence secretary Chuck Hagel called it “a destabilising attempt to alter the status quo in the region” and warned that the US would defy the order. The Pentagon has since stated that US pilots will not switch on their transponders to comply, and will defend themselves if attacked. Think about this for a moment.

Mr Hagel asserted categorically that Washington will stand behind its alliance with Japan, the anchor of American security in Asia. “The United States reaffirms its long-standing policy that Article V of the US Japan Mutual Defense Treaty applies to the Senkaku Islands,” he said.

Whether China fully believes this another matter, of course. The Senkaku islands offer a perfect opportunity for Beijing to test the resolve of the Obama Administration since it is far from clear to the war-weary American people why they should risk conflict in Asia over these uninhabited rocks near Taiwan, and since it also far from clear whether President Obama's Asian Pivot is much more than a rhetorical flourish.

Besides, Beijing has just watched the US throw its long-time ally Saudi Arabia under a bus over Iran. It has watched Moscow score an alleged victory over Washington in Syria. You and I may think it is an error to infer too much US weakness from these incidents, but that is irrelevant. Beijing seems to be drawing its own conclusions.

Even if the immediate crisis can be defused, we are clearly sliding into a new Cold War. While it is dangerous, it could have paradoxical and powerful side effects. Rearmament lifted the world economy out of slump in the late 1930s, working as a form of concerted Keynesian fiscal stimulus. It could do so again.

The parallels are not exact. They never are. But an Asian arms race would almost certainly tackle some of the underlying causes of the long malaise in the Western economies. It would soak up much of the Asian "savings glut" and the excess industrial capacity in China, and would help to narrow the perennial East-West trade gap.

This would be an answer of sorts to the West's "secular stagnation" – to use the term of former US treasury secretary Larry Summers – or the liquidity trap as others call it. But be careful what you wish for.

Jul 5, 1914:

Germany gives Austria-Hungary blank check assurance

On July 5, 1914, in Berlin, Kaiser Wilhelm II of Germany pledges his country's unconditional support for whatever action Austria-Hungary chooses to take in its conflict with Serbia, a long-running rivalry thrown into crisis by the assassination, the previous June 28, of Archduke Franz Ferdinand of Austria and his wife by a Serbian nationalist during an official visit to Sarajevo, Bosnia.

Barely a week after Franz Ferdinand's murder, the Austrian Foreign Ministry sent an envoy, Alexander, Graf von Hoyos, to Berlin. Hoyos carried a memorandum from the office of the Austrian foreign secretary, Leopold Berchtold, expressing the need for action in the tumultuous Balkans region, as well as a personal letter to the same effect from Emperor Franz Josef to Kaiser Wilhelm. Both documents focused on the need for Austria-Hungary to establish an alliance with Bulgaria, in place of Romania—which Germany had previously favored as a possible Balkan ally—due to the latter nation's increasing closeness with Serbia and its powerful supporter, Russia. Neither the memorandum nor the emperor's letter specified that Austria-Hungary wanted war, but the memorandum—a new version of an earlier, less emphatic text written before Franz Ferdinand's assassination—stressed the need for immediate action, pointed to increased Serbian and Russian aggression and stated as an objective the elimination of Serbia as "a factor of political power in the Balkans."

Austria's ambassador to Germany, Ladislaus Szogyeni-Marich, passed Hoyos' two documents to the kaiser over lunch on July 5, in Potsdam. Wilhelm was outraged by Franz Ferdinand's murder, and felt a sense of personal loss: the two had met at the archduke's country estate just two weeks before the assassination to discuss the situation in the Balkans. Though he initially demurred and said he needed to consult the German chancellor, Theobald von Bethmann Hollweg, he eventually—when pressed by the ambassador—responded with uncharacteristic decisiveness, promising Germany's "faithful support" for Austria-Hungary in whatever action it chose to take towards Serbia, even if Russia intervened. Later that afternoon, Wilhelm assembled a crown council, attended by Bethmann Hollweg, Foreign Secretary Arthur Zimmermann, and War Minister Erich von Falkenhayn, among others. From this meeting, a consensus emerged backing the kaiser's decision, which Bethmann Hollweg subsequently relayed to the Austrian representatives and Hoyos triumphantly carried back to Vienna.

“If tyranny and oppression come to this land it will be in the guise of fighting a foreign enemy.”

James Madison.

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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