Baltic Dry Index. 1127 -21
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
Treaties are like roses and young girls.
They last while they last.
Charles de Gaulle.
It’s everyman for himself, as the Great Nixonian Error of
fiat currency enters its death throes. All against all. Alliances are only
illusionary temporary mirages, as the last world hegemon attempts to protect
its status as sole reserve currency. Japan’s beggar thy neighbour currency war,
a slowdown in China, and the end of unlimited QE Forever in the USA, has set
off turmoil in the house of cards, financialised world built on scammy
derivatives gambling.
With nothing anchored to anything fixed, the Great Global
Wobble surges from one economy to another. Stay long fully paid up physical
precious metals. We haven’t seen anything yet. The Great Vampire Squids and the
western banksters behind them, backed by their central banks, and the NSA and
GCHQ, now play the game of instant national takedown. Another unintended
consequence of the Great Nixonian Error of fiat money. Shame about the ordinary
people trashed along the way to derivatives profit for the Squids and
Banksters. Is 2014 about to join the curse of the 14s?
No
nation has friends only interests.
Charles de Gaulle.
Topix Falls to Cap Biggest Monthly Drop Since May 2012
Jan 31,
2014 6:29 AM GMT
Japan’s Topix index fell as
the yen strengthened against the dollar, with the equity gauge capping its
largest monthly decline since May 2012. Toyota Motor Corp., the world’s biggest carmaker, retreated 1.3 percent after the yen rose. Toshiba Corp. sank 7.5 percent, the most on the Nikkei 225 Stock Average, after third-quarter profit for the maker of products from nuclear reactors to flash-memory chips missed analyst estimates. Fujitsu Ltd. surged 13 percent to a three-year high as earnings at the computer-equipment manufacturer beat expectations.
The Topix index slid 0.3 percent to 1,220.64 at the close in Tokyo. The measure dropped 3.5 percent this week and 6.3 percent for the month as weak economic data from China and a sell-off of emerging-market currencies sparked a global equities rout. The Nikkei 225 lost 0.6 percent today to 14,914.53. The yen gained 0.3 percent to 102.46 per dollar, poised for its steepest monthly rise since April 2012.
“It’s hard to tell just how far the
chaos from the emerging-market currencies will spread globally,” said Yoshihisa
Okamoto, the Tokyo-based head of equity research at Mizuho Asset Management Co.
“In the FOMC statement, the Fed didn’t suggest there’s concern about emerging
markets, and that’s causing unease among investors.”
More
Emerging market storm spreads to Russia as rouble wobbles
Russian central bank vowed “unlimited” intervention to defend the rouble after it fell to a record low against a basket of currencies
The simmering crisis in emerging
markets has spread to Eastern Europe, forcing Russia and Romania to defend
their currencies against capital flight and triggering a sharp rise in
Hungary’s borrowing costs.
The Russian central bank vowed
“unlimited” intervention to defend the rouble after it fell to a record low
against a basket of currencies.
Moscow has already burned through
$7bn of reserves since early January. Yields on Russia’s two-year
“cross-currency swaps” – closely watched by traders for signs of a liquidity
crunch – rocketed by 60 basis on Thursday to 7.6pc. They have risen by 140
points in the past three weeks.
----While there is no single cause for the emerging market sell-off, the backdrop is a combined monetary squeeze by the US and China that is draining liquidity from the global system.
Russia’s central bank governor,
Elvira Nabiullina, said she would not allow a disorderly rouble slide or risk
widespread damage to the financial system, backing away from earlier pledges to
free the exchange rate. “We are not planning to quit intervention,” she said.
James Lord and Meena Bassily,
from Morgan Stanley, said Russia faces an invidious choice, since any move to
defend the rouble automatically tightens monetary policy, pushing up borrowing
costs. Russia learnt a hard lesson in 2008-2009 when it spent $200bn of
reserves defending the currency but in the process caused a collapse of the
money supply and destroyed part of the banking system. Yet it cannot risk a
policy of benign neglect at a time of stubbornly high inflation and capital
outflows that reached $63bn last year.
Tatiana Orlova, from RBS, said
there is a risk of “a run on the currency” unless the authorities take decisive
action.
More
Rajan Warns of Policy Breakdown as Emerging Markets Fall
Jan 31, 2014 3:55 AM GMT
India central bank Governor Raghuram Rajan warned of a breakdown in global policy
coordination after the Federal Reserve further cut stimulus, weakening
emerging-market currencies from the rupee to the Turkish lira. Rajan, a former chief economist at the International Monetary Fund, called for greater cooperation among policy makers weeks before finance chiefs from the world’s top developed and emerging markets gather in Sydney. The Fed’s Jan. 29 statement made no mention of developing economies.
“International monetary cooperation has broken down,” Rajan, 50, said yesterday in an interview in Mumbai with Bloomberg TV India, noting how emerging markets helped pull the global economy out of crisis starting in late 2008. “Industrial countries have to play a part in restoring that, and they can’t at this point wash their hands off and say we’ll do what we need to and you do the adjustment.”
More
Abe Doomsday Risk Prompts Moody’s Warning on JGBs: Japan Credit
Jan 31,
2014 1:32 AM GMT
Moody’s Investors Service says Japan’s biggest banks need to cut bond holdings and boost
loans to protect their balance sheets from potential losses should Prime
Minister Shinzo Abe’s stimulus spur yield surges. Lenders’ stockpiles of sovereign debt were at 138.9 trillion yen ($1.35 trillion) in November, after peaking at a record 171 trillion yen in March 2012, Bank of Japan data show. Unprecedented buying of JGBs by the BOJ is allowing lenders such as Sumitomo Mitsui Financial Group Inc. to decrease holdings of the securities, while the world’s lowest interest rates constrain profits in lending.
Sumitomo Mitsui, Japan’s second-biggest bank by market value, cut Japanese government bond holdings by 56 percent, or 11.5 trillion yen, at its main lending unit in the nine months to December, as domestic loans rose 4.3 percent last year. The BOJ, which has driven 10-year yields down to 0.62 percent, estimated in October that a one-percentage-point increase in JGB yields would cause the biggest banks to incur 2.9 trillion yen in unrealized capital losses.
“Banks need to rebalance their portfolios away from JGBs,” Graeme Knowd, a Tokyo-based associate managing director at Moody’s who overseas financial institutions, said in a phone interview. “If it turns out that Abenomics hasn’t worked and only ended up leaving Japan with a bigger pile of debt,” a “doomsday scenario for JGBs” isn’t “a zero probability scenario,” he said.
More
Argentina 105% Stock Return Proves Illusory as Peso Sinks
Jan 31, 2014 3:00 AM GMT
Argentine stocks posted some of the best returns in the world in President
Cristina Fernandez de Kirchner’s second term, as long as you ignore inflation
and depreciation. In reality, they were among the worst. The CHART OF THE DAY shows that while the Merval index doubled in peso terms since her re-election Oct. 24, 2011, the shares lost 15 percent once returns were converted to dollars at the rate investors use to avoid currency controls. While the 105 percent local-currency return was the fifth-biggest among 94 indexes globally during the period, the drop in dollar terms made the gauge the world’s 12th-worst performer.
“Argentina is a high-risk, high return market and there has been more risk than return lately,” said Eric Conrads, a money manager who helps oversees $750 million of Latin American stocks at ING Investment Management in New York. He said he sold the last of his Argentine shares last year.
Fernandez devalued the peso last week in a bid to shore up foreign reserves that sunk to a seven-year low amid a surge in government spending, inflation estimated at about 30 percent and declining prices for the country’s soy and wheat exports.
More
Emerging Market Rout May Signal ‘Sudden Stop’: Cutting Research
Jan 31,
2014 12:00 AM GMT
Brazil, South Africa, Turkey and Ukraine are the emerging
markets most at risk of a “sudden stop,” in the view of Morgan Stanley. That’s defined as a halt or even a reversal in capital flows into a country, slashing access to international financial markets for an extended period and weakening the economy. The term is often linked to 1995 work by Rudi Dornbusch, the late international economics professor at the Massachusetts Institute of Technology in Cambridge.
Mexico, Indonesia, India and Thailand are also in some jeopardy of such a phenomenon as investors turn sour on emerging markets, London-based economists Manoj Pradhan and Patryk Drozdzik said in two reports to clients over the past week. They wrote as central banks in India, Turkey and South Africa raised interest rates to shore up confidence in their currencies.
The Morgan Stanley authors evaluated the risk by looking at factors such as the reliance on capital inflows and credit, the size of the current account deficit, the legroom for policy and exposure to China. In the case of Brazil, for example, capital inflows account for almost half the money entering the country, total external debt is more than the size of foreign exchange reserves, the current account shortfall is almost 4 percent of gross domestic product, inflation is around 6 percent and government debt is about 70 percent of GDP.
The countries most in danger now face questions over how they will fund their budget and trade gaps and whether they can pivot to new sources of expansion, the economists said. Investors should monitor the processes of reducing debt and political splits. Ukraine, Turkey and Thailand have all witnessed social unrest.
More
And the
future…. More below of the unintended consequences of the Great Nixonian Error
of fiat money. Will it be different this
time, or as history suggests, will the old empire and the rising empire, clash?
China Can't Afford to Let Its Housing Bubble Pop
Jan 30, 2014 6:02 PM GMT
Among the many reasons to dismiss President Xi Jinping's pledges to
transform China's growth model, Gan Li may offer the best: an epic housing
bubble that can't be allowed to pop.Gan, a professor at Southwestern University of Finance and Economics in Chengdu, Sichuan and at Texas A&M University in College Station, Texas, recently crunched some disturbing numbers on the level and distribution of household income and wealth. After examining survey results from 28,000 households and 100,000 individuals, Gan believes that roughly 65 percent of China’s household wealth is sitting in real estate.
An astounding 90 percent of households in nation of more than 1.3 billion people already owns homes. In the first half 2012, he found, about 42 percent of demand for properties came from buyers who already owned at least one. Many of these homes and apartments, it goes without saying, were bought in the midst of one of history's biggest real estate booms and bubbles.
“The Chinese housing market is clearly oversupplied,” Gan told Tom Orlik, a Bloomberg economist based in Beijing. “Existing housing stock is sufficient for every household to own one home, and we are supplying about 15 million new units a year. The housing bubble has to burst. No one knows when.”
When is does, the damage to household wealth will reverberate across the second-biggest economy, devastate consumption and increase risks of social unrest. In other words, it's something the Communist Party can't allow to happen. While Xi's promises to tolerate less gross domestic product growth as he weans China off its addiction to exports, the pressure to sustain property prices will take precedence over reform.
More
At the Comex
silver depositories Thursday
final figures were: Registered 49.93 Moz, Eligible 129.89 Moz, Total 179.82 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the Goldmanites v the Muppets again. Guess
who wins.
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
Goldman sued by Libyan fund over $350m profits
Libyan Investment Authority accuses bank of "deliberately exploiting" relationship for own gain
Goldman Sachs is being sued by
the Libyan Investment Authority over $350m (£212m) of profit made in a series
of derivative trades which turned sour in the financial crisis.
The investment bank stands
accused of “deliberately exploiting” its relationship with the sovereign wealth
fund in order to make “substantial profits.”
Goldman is being sued in the High
Court in London over a $1bn series of nine trades into companies including
Citigroup, EdF, Santander and ENI.
The trades, entered into between
January and April 2008, rapidly turned south as global markets tanked, leaving
LIA nursing losses.
The fund is suing Goldman,
arguing it made $350m of up-front profit margin on the disputed trades.
In the particulars of claim, the
LIA accuses the investment bank of taking advantage of the fund’s young and
inexperienced staff.
It uses the claim to allege that
key bankers - including Driss Ben-Brahimm and Youssef Kabbaj - sought to
influence members of LIA staff.
Mr Kabbaj, who looked after
Goldman’s Libyan efforts, is alleged to have spent time in the LIA’s offices
and promised fund staff the chance to study at the bank’s ‘university’ in
London.
He is also alleged to have
brought them small gifts - including aftershaves and chocolates - and took a
number of LIA staff to his native Morocco where he “paid for extensive expenses
for them on his corporate credit card.”
The LIA claims that the fund
staff became dependent on the bank, and that Mr Kabbaj and Mr Ben-Brahim, who
was Goldman’s head of trading for emerging markets, “reassured the LIA they
were one Goldman’s key strategic clients.”
As such, it is alleged the LIA
was “heavily” encouraged by Goldman to enter into a series of trades to gain
leveraged exposure to a number of companies.
The first trade, a $100m derivate
bet on the share price of global bank Citigroup, was entered in to on January
25, with the others following over a three month period.
But by the end of 2008, the
trades had “lost substantially all of their value,” and expired worthless during
the course of 2011.
More
One
of the queries Quakers are asked to consider, is: "Do you maintain strict
integrity in your business transactions and in your relations with individuals
and organizations? Are you personally scrupulous and responsible in the use of
money entrusted to you, and are you careful not to defraud the public
revenue?"
Probably
why there a no Quakers on Wall Street.
The monthly Coppock Indicators finished December and 2013.
DJIA: +204 Up. NASDAQ: +311 Up. SP500: +247 Up.
The new Fed bubble continues, but for how much longer?
