Baltic Dry Index. 1322 -47
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
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.
We open
today with an unpleasant surprise from China. The world’s number two economy is
suddenly contracting. While this may just be a one-off blip, possibly related
to winter and the coming Chinese Lunar New Year holidays, (the year of the
horse,) the recent collapse in the Baltic Dry Index suggest that might well be
something more than that. If it is something more than a blip, our Great
Disconnect in our stock markets is about to reconnect fast in a Big Bang.
"In
economics, hope and faith coexist with great scientific pretension."
J. K. Galbraith.
China Manufacturing Index Signals Surprise Contraction
Jan 23, 2014 4:00 AM GMT
China’s manufacturing may
contract for the first time in six months, adding to stresses in the world’s
second-biggest economy, according to a gauge released by HSBC Holdings Plc and
Markit Economics. The preliminary reading of 49.6 for January in a Purchasing Managers’ Index (EC11FLAS) released today was below a final figure of 50.5 in December and all 19 estimates of analysts in a Bloomberg News survey.
A number above 50 indicates expansion.
More
Asian Stocks Drop After China’s Flash Manufacturing PMI
Jan 23, 2014 6:26 AM GMT
Asian stocks fell, with the regional benchmark index heading for its
first drop in three days, after a gauge of China’s
manufacturing unexpectedly contracted. China Construction Bank Corp. (939) slid 2.7 percent in Hong Kong, pacing losses among Chinese lenders. Hang Lung Properties Ltd., the Hong Kong developer investing more than $8.5 billion building malls in mainland China, declined 3.7 percent after posting a drop in underlying profit. Insurance Australia Group Ltd. lost 3 percent after the nation’s largest car and home insurer lowered its growth forecast for gross premiums.
The MSCI Asia Pacific Index fell 1.1 percent to 138.46 as of 3:11 p.m. in Tokyo, with all 10 industry groups on the gauge dropping. The measure extended losses as a private gauge of China’s manufacturing dropped to a six-month low in January, adding to signs growth in the world’s second-largest economy is slowing.
More
Zhou Risks Turmoil With Easing of China Rate Controls
Jan 23, 2014 7:17 AM GMT
China central bank Governor
Zhou
Xiaochuan faces an obstacle in his efforts to tame financial market
volatility: his own plans to free up interest rates.
The benchmark money-market rate remains above the average for January even after the People’s Bank of China this week injected more than $62 billion following the biggest jump since June. At the same time, Zhou’s planned removal of interest-rate controls may make volatility tougher to prevent, with Standard Chartered Plc economist Stephen Green saying that crisis is a “rule of financial liberalization.”
----“China is facing a dilemma,” said Dong
Tao, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. “If
interest rates are not liberalized, shadow-banking activities spread like
wildfire. If rates are freed up, it will worsen problems for existing debt.”
More
Next, news from the Great Egos and Infamous one percenter’s, gathered in splendour in Davos, Switzerland. Isolated from humanity in the new, and razor wire fenced, heavy security patrolled, ghetto of the InterContinental Hotel, overlooking the unfortunate people of Davos, Switzerland, remains home to the probity challenged Swiss mega bank, UBS, which seemed to think that respecting USA laws was optional.
Below, in
banksterland, everything’s fixed until it isn’t.
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
Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Weber
Ex-Bundesbank head Axel Weber expects fresh market attacks on eurozone this year and economist Kenneth Rogoff says the euro was a "giant historic mistake"
A top panel of experts in Davos
has poured cold water on claims that the European crisis is over, warning that
the eurozone remains stuck in a low-growth debt trap and risks being left on
the margins of the global economy by US and China.
Axel Weber, the former head of
the German Bundesbank, said the underlying disorder continues to fester and
region is likely to face a fresh market attack this year.
"Europe is under threat. I
am still really concerned. Markets have improved but the economic situation for
most countries has not improved," he said that the World
Economic Forum in Davos.
Mr Weber, now chairman of UBS,
said the European Central Bank's stress test for banks in November risks setting
off a new sovereign debt scare, reviving the crisis in the Mediterranean
countries.
"Markets are currently
disregarding risks, particularly in the periphery. I expect some banks not to
pass the test despite political pressure. As that becomes clear, there will be
a financial reaction in markets," he said.
Harvard professor Kenneth Rogoff
said the launch of the euro had been a "giant historic mistake, done to
soon" that now requires a degree of fiscal union and a common bank
resolution fund to make it work, but EMU leaders are still refusing to take
these steps.
"People are no longer
talking about the euro falling apart but youth unemployment is really horrific.
They can't leave this twisting in wind for another five years," he said.
Mr Rogoff said Europe is
squandering the "scarce resource" of its youth, badly needed to
fortify an ageing society as the demographic crunch sets in.
While Europe still has great
skills in technology and an established rule of law that is the envy of most
emerging market states, it risks loasing footing as a major player in the
global economy.
----Mr Rogoff said debt write-downs across the EMU periphery "will eventually happen" but the longer leaders let the crisis fester with half-measures, the worse damage this will do to European society in the end.
Mr Weber, who resigned from the
Bundesbank and the ECB in a dispute over euro debt crisis strategy, said new
"bail-in" rules for bond-holders of eurozone banks will cause
investors to act pre-emptively, aiming to avoid large losses before the ECB
issues its test verdicts.
More
Davos 2014: global economy not safe until 2020, says Barclays chief Antony Jenkins
Barclays chief Antony Jenkins says that despite increased regulation across the banking system, there was still much work to be done
The global market will not be
fully safeguarded against a repeat of the global financial crisis until the end
of the decade, warned Barclays chief executive Antony Jenkins, as he cautioned
that banks were not the only threat to the system.
Mr Jenkins said that despite
increased regulation across the banking system, there was still much work to be
done, and that the focus should not be on banks alone.
“It is very difficult to argue the
financial system is not safer than it was in 2008, the question is how much
safer,” said Mr Jenkins.
“Levels of supervision are more
favourable…the emphasis that institutions place on culture and conduct has
reduced the probability that the events of 2008 will be repeated. But it does
not eliminate them.
“We still have a significant
amount of work to conclude – this will not happen until close to the end of
this decade.
----Speaking during a Davos debate on whether the markets are safer now than before the global crisis, he said bankers, regulators and politicians “must not lose sight” of the wider financial system.
The Barclays chief, who took the
helm of the bank in August 2012 following the exit of Bob Diamond in the wake
of the Libor scandal, said by focusing exclusively on banks there was a
potential for risk to move into other areas – such as shadow banking and
insurance.
“If we don’t take a systemic
approach, we could fight yesterday’s war only to find it move to another part
of the financial system.
“The system is safer, but it
needs to be safer yet, and societies around the world need to decide through a
democratic process how we balance safety and soundness with capacity.”
Douglas Flint, chairman of HSBC,
largely agreed with Mr Jenkins, and said that the naming of designated
systemically important financial institutions, of which HSBC is one, had only
concentrated risk in the system.
He also said that housing finance
and sovereign debt are the two asset classes into which banks have been
incentivised in recent years, but that history had shown they are the two most
likely to trigger a financial crisis.
More
Davos Bankers Struggle to Convince Elite That Markets Are Safer
Jan 22,
2014 11:00 PM GMT
Top bank executives are struggling to convince the world’s business elite in
Davos the financial system is safer, more than five years since it fell into
crisis. In what has become a yearly sparring match between bankers and their critics, HSBC Holdings Plc (HSBA) Chairman Douglas Flint and Barclays Plc (BARC) Chief Executive Officer Antony Jenkins, two of Britain’s top bankers, faced criticism yesterday from Paul Singer, the billionaire hedge-fund manager who runs New York-based Elliott Management Corp., and Stanford University professor Anat Admati at a debate at the World Economic Forum.
“It can’t be that safer comes from relatively modest improvements in certain metrics plus private and policy maker half-steps,” said Singer, whose New York-based hedge fund manages $24 billion. “Because of the inability of investors to understand the financial condition of the major financial institutions, they aren’t able to stand on their own in the next financial crisis.”
Five years after the collapse of Lehman Brothers Holdings Inc. forced governments to bail out financial firms and prompted a global recession, bankers are still grappling to convince the public they can avoid a similar crisis. In a vote at the end of the debate, almost 40 percent of the 100-strong Davos audience said markets haven’t been made safer. Banks and financial services are the least trusted of all industries, according to a survey by public relations firm Edelman released on Jan. 20.
More
We end for
today with yet more news from China. America’s pot calls China’s kettle black.
Our lawless age rolls on. Anyone remember “the crooked E”, Enron and Arthur
Andersen?
China Auditors Barred for Six Months Over Blocking SEC Probes
Jan 23, 2014 2:11 AM GMT
Chinese affiliates of the four largest accounting firms were barred for six
months from leading audits of U.S.-listed companies after failing to comply
with Securities and Exchange Commission orders for documents at the heart of a
series of accounting fraud probes. The decision by U.S. Administrative Law Judge Cameron Elliot, if finalized, would force more than 200 Chinese companies traded in the U.S. to find new auditors, while multinationals with significant operations in China, like General Motors Co., would also have to bring in new firms to check those units, said Jason Flemmons, a former SEC accountant who is now a senior managing director at FTI Consulting Inc.
“This is a big deal,” said Lynn Turner, a former SEC chief accountant. “For those companies that have an audit report to be done, finding another auditor in China might be a bit difficult.”
The sanctioned firms said in an e-mailed statement that they will appeal the decision.
The SEC filed an action against the auditors in 2012 after struggling for years to obtain information for dozens of accounting fraud probes at China-based companies. After an agreement in May between the two countries allowed some information to be shared, the accounting firms argued, unsuccessfully, that the SEC was getting what it needed and that the case jeopardized the listings of hundreds of Chinese companies trading in the U.S.
More
J. K.
Galbraith
At the Comex
silver depositories Wednesday
final figures were: Registered 49.59 Moz, Eligible 127.54 Moz, Total 177.13 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Yes more banksterism again. In our new lawless age, what did you expect. Below, there’s no honour among thieves anymore.
Banks are an almost irresistible attraction for that element of our society which seeks unearned money.J. Edgar Hoover
Credit Suisse Sued by China Green Chief Over Alleged Negligence
Jan 23, 2014 12:57 AM GMT
Credit Suisse
Group AG (CSGN) was sued by Li Tao, chairman of New York-listed China Green Agriculture Inc. (CGA), who claims
the bank was negligent and made unauthorized trades on his behalf. The bank misled Li on the status of his account, failed to explain risks on some trades and didn’t inform him within a reasonable time of any shortfall, according to a lawsuit filed in Singapore High Court. The bank denied any wrongdoing.
Credit Suisse traded accumulators tied to a Hong Kong-listed company without his permission, Li claimed. When his account balance fell into the negative, the bank used HK$60 million ($7.7 million) he had on deposit to cover the shortfall without his permission, Li said. He had intended to use the money for his immigration to New Zealand, the Chinese citizen said in court papers.
Credit Suisse had explained the risks to Li, without having any legal obligation to do so, the Zurich-based bank said in its defense papers filed this month. Li, who had substantial investment experience and a high-risk attitude, made trading decisions independently, the bank said.
Accumulators commit investors to buy securities at preset prices for a specified time.
Li orally approved the trades he claims were unauthorized and failed to dispute them until more than a year later, according to papers filed by Credit Suisse.
Credit Suisse doesn’t comment on ongoing litigation, Edna Lam, a spokeswoman for the bank, said in an e-mail. Li didn’t immediately respond to an e-mailed request for comment.
China Green, based in Xi’An, China, was the target of an analyst research report in 2011 alleging the company inflated its revenue and had improbable sales. Li wrote to shareholders and said the report had “countless errors” and was “untrue.”
More
Banks Aid U.S. Forex Probe, Fullfilling Libor Accords
Jan 23,
2014 5:00 AM GMT
Banks
bound by cooperation agreements in an interest-rate rigging probe are providing
a windfall of information to U.S. prosecutors investigating possible currency
manipulation, according to a Justice Department official and a person familiar
with the matter.
“We’ve seen tangible, real
results,” Mythili Raman, the acting head of the Justice Department’s criminal
division, said in an interview. The cooperation “expanded our investigations
into the possible manipulation of foreign exchange and other benchmark rates,”
said Raman, who declined to name the banks or comment further on the probe.
The accords have compelled some
lenders to conduct internal examinations of their foreign-exchange businesses
and share findings with the Justice Department, speeding the government’s
criminal probe into the $5.3 trillion-a-day market, according to a person with
knowledge of the investigation.
Some banks are handing over lists
of potential witnesses, making employees available for interviews and giving up
documents without subpoenas, said the person, who asked not to be identified
because the inquiry is confidential. Investigators are holding weekly and
sometimes daily phone calls with the banks, the person said.
More
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
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?
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