Baltic Dry Index. 1512 -194
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
Mayday,
mayday, mayday. We open today by noticing the sudden swoon in the Baltic Dry Index
since January 3rd when it stood at 2036. In less than two weeks it
has collapsed by 25 percent. Is world trade slowing smartly ahead of the Fed “taper”
and rising global interest rates in a great reconnect, or is it a mere technical
blip in the shipping market?
Over the next few weeks we are about to find out.
If world trade really is slowing again, the European Monetary Union will likely become
the biggest loser.
Up next, the
Fed comes late to a party that’s been in full swing for some weeks. As alleged market
rigging scandals go, rigging the foreign exchange markets is the top of the
league. Banksters, they can resist anything except temptation, to misquote
Oscar Wilde.
Federal Reserve Said to Probe Banks Over Forex Fixing
Jan 13, 2014 5:00 AM GMT
The Federal
Reserve is investigating whether traders at the world’s biggest banks
rigged benchmark currency rates, raising the risk that firms will be penalized
for lax controls as regulators look for wrongdoing. The Fed, which supervises U.S. bank holding companies, is among authorities from London to Washington probing whether traders shared information that may have let them manipulate prices in the $5.3 trillion-a-day foreign-exchange market to maximize their profits, said a person with direct knowledge of the matter, asking not to be named because it’s confidential.
“The Fed has discretion whether to and how much to fine the banks if deficient controls or lack of supervision resulted in traders at these banks manipulating currency rates,” said Jacob S. Frenkel, a former federal prosecutor and now a lawyer at Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland.
The Fed punished firms for internal-control lapses last year as it worked with state and federal authorities on cases involving Iranian sanctions and botched derivatives bets. The foreign-exchange inquiry looks at benchmark WM/Reuters rates used by companies and investors around the world.
Those rates are determined by trades executed in a minute-long period called “the fix” at 4 p.m. in London each day. By concentrating orders in the moments before and during the 60-second window, traders can push the rate up or down, a process known in the industry as “banging the close.”
More
In better
news for the bankster gang, here we go again with ramping up derivatives
betting. The next Lehman is out there and just took a giant leap closer. Given
that the banksters lobbied for the change under the pretext of economic growth
and job creation, the reality is all too likely to increased derivatives
gambling, increased bonuses, all backed up
by the too big to fail socialism of the hapless national taxpayers.
“People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a conspiracy against the
public, or in some contrivance to raise prices.”
Adam Smith
Basel Regulators Ease Leverage-Ratio Rule for Banks
Jan 13, 2014 12:00 AM GMT
Global regulators diluted a planned debt limit for banks amid warnings that
the measure would penalize low-risk financial activities and curtail lending. The measure, known as a leverage ratio, was adjusted after “thoroughly analyzing bank data,” the Basel Committee on Banking Supervision said in a statement following a meeting of regulators in Basel, Switzerland, yesterday. The group also modified a liquidity rule to make it easier to count a certain type of central bank loan against regulatory standards.
Changes to the leverage rule give lenders more scope to use an accounting practice known as netting to calculate the ratio, and ease proposals on how lenders determine the size of their off-balance sheet activities. Other amendments avert the risk that banks end up double-counting some derivatives trades, the regulators said.
----Leverage ratios are designed to curb
banks’ reliance on debt by setting a minimum standard for how much capital they
must hold as a percentage of all assets on their books. A quarter of large
global lenders would have failed to meet the June version of the leverage limit
had it been in force at the end of 2012, according to data
published by the Basel committee in September.
----Banks such as BNP Paribas SA (BNP), Bank of America Corp. and Citigroup Inc. (C) called for amendments to the draft leverage rule published in June, saying it would adversely affect economic growth and job creation, make it more expensive for governments to sell their debt and give banks incentives to invest in riskier assets.
The increased use of netting was a key demand of lenders. The process allows banks to offset the value of different assets and liabilities taken on with a single trading partner, reducing the size of their assets when they calculate whether they meet the rule.
More
European Stocks Advance as Basel Debt Leverage Rule Eased
Jan 13, 2014 8:10 AM GMT
European
stocks gained for a second day, after the Stoxx Europe 600 Index posted its
first full-weekly gain of 2014, as global regulators diluted a debt-limit plan
for banks. U.S. futures declined, while Asian shares rose. A gauge of bank stocks rose after the Basel Committee on Banking Supervision’s announcement on capital requirements. UBS (UBSN) AG advanced 2 percent as Chief Executive Officer Sergio Ermotti said the lender won’t spin off its investment-banking business to meet regulators’ demands for holding more capital.
----A measure of bank-related stocks posted the second-biggest gain of the 19 industry groups in the Stoxx 600. Deutsche Bank AG advanced 2 percent to 37.56 euros. Barclays Plc gained 1.7 percent to 288.4 pence.
UBS climbed 2 percent to 18.55 Swiss francs. Ermotti refuted a report by Mediobanca SA analysts last week that Switzerland’s biggest lender may dispose of the investment-banking business as higher capital requirements from regulators thwart efforts to boost returns.
More
In other banking news, tiny
bankrupt Iceland is proposing to use the EU Cyprus solution to its banking
creditors, except that rather than ripping off the bank depositors, Reykjavik
has more in mind the hedge fund community. The Fed and ECB will move heaven and
earth to stop them.
“Civil
government, so far as it is instituted for the security of property, is in reality
instituted for the defence of the rich against the poor, or of those who have
some property against those who have none at all.”
Adam
Smith.
Iceland Loses Patience as Bank Creditor Settlements Drag On
Jan 13, 2014 12:01 AM GMT
Iceland is losing patience with creditors in its failed banks as the
government considers forcing through bankruptcy proceedings to help it exit
capital control in place since 2008. “The Bankruptcy Act doesn’t anticipate that attempts to seek composition last forever,” Finance Minister Bjarni Benediktsson said in a Jan. 10 interview in Reykjavik. “It’s to the benefit and in the interest of everyone to complete these matters as soon as possible.”
The banks that collapsed in 2008, Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf, have been run by winding up committees representing their creditors, many of whom are hedge funds. So far, the two sides have failed to reach an agreement as Iceland fights to ensure any deal doesn’t trigger a flight of capital out of the country that would derail its financial markets.
The combined kronur-denominated assets of the creditors are equivalent to about 461 billion kronur ($3.9 billion), or 28 percent of the nation’s gross domestic product. The leaders of all of Iceland’s political parties have said these assets will need to be written down before a settlement can be reached.
Setting a deadline and forcing bankrupt entities to convert their foreign holdings into kronur “is one of the things that we’re looking into,” Benediktsson said. “I don’t want to make any statements” on whether this will happen later this year “although I don’t exclude it.”
More
We close today with commodities
gambling. Dare the Fed raise interest rates in a probable global slowdown?
“No
society can surely be flourishing and happy of which by far the greater part of
the numbers are poor and miserable. ”
Adam
Smith
Bullish Bets Fell Most in Seven Weeks Before Slump: Commodities
Jan 13, 2014 4:57 AM GMT
Hedge funds cut their bullish commodity wagers by the most in seven weeks
before prices dropped to an eight-month low on signs of surplus supply and
slowing economic growth in China. The net-long position across 18 U.S.-traded commodities fell by 11 percent to 678,885 futures and options in the week ended Jan. 7, U.S. Commodity Futures Trading Commission data show. Investors are the most bearish on wheat ever and anticipate lower prices for corn, coffee, sugar and soybean oil. Bullish gold wagers rose to the highest since mid-November.
Raw-material prices fell 3.5 percent since Dec. 31, the worst start to a year since 2007. In China, the biggest user of everything from pork to zinc to cotton, producer prices declined in December for a 22nd straight month, the longest decline since the Asian financial crisis in the 1990s. World stockpiles of wheat and soybeans will be bigger than analysts estimated, the U.S. Department of Agriculture said. Copper and nickel will be in surplus this year, Barclays Plc forecast.
More
“It is not very unreasonable that the rich should contribute to
the public expense, not only in proportion to their revenue, but something more
than in that proportion.” (Repealed)
Adam Smith
At the Comex
silver depositories Friday
final figures were: Registered 49.82 Moz, Eligible 126.68 Moz, Total 176.50 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Last week we covered the newly coined “MINT” grouping of Mexico, Indonesia, Nigeria and Mexico, as the next “BRIC, Brazil, Russia, India and China. Coined by ex Goldmanite economist Jim O’Neill and promoted by the left wing BBC, I sceptically pointed out that the operative word might be turkey. Today a heavyweight economist also has some issues with the MINT. With the BRIC in retreat, the MINT is an unlikely very awkward replacement.
The MINTs are very different and might not all see stellar growth
In rapidly developing countries, often the proceeds of economic growth fail to flow adequately to shareholders – particularly foreign ones
Another acronym has recently
sprung up associated with my fellow economist, and Telegraph columnist, Jim
O’Neill – the “MINTs”, referring to Mexico, Indonesia, Nigeria and Turkey. In
fact, the term was first coined by Fidelity, the Boston-based fund manager, but
it has been popularised by O’Neill.
It follows the great success of
the term “BRICs”, referring to Brazil, Russia, India and China, which he first
coined. Does this new grouping make much sense? And, whether it does or not, do
these countries enjoy the prospect of exceptionally strong growth in the years
to come?
Although the term BRICs has
become embedded in the lexicon, the BRICs themselves have recently suffered a
fall from grace. Each of these countries has undergone a major growth slowdown.
What’s more, this looks like continuing.
Admittedly, compared to the
developed West, China and India will grow well, though at more modest rates
than before. But this year Russia and Brazil will probably grow more slowly
than the UK. It is this slowdown in the BRICs which has set off the search for
the new growth stars.
Given that each of the BRIC
countries has slowed, you might readily think that this is for some common
reason. But, in fact, they have slowed for different reasons, as befits the
fact that each of them is very different.
Together, the BRICs make a good
acronym but a bad concept.
Russia and Brazil are commodity
producers with relatively poor growth prospects; China is a rapidly urbanising
export and manufacturing powerhouse, while India has still not managed to
achieve “Chinese” growth rates but continues to possess the potential for rapid
growth, given that it is still well down the development ladder.
The MINT acronym is only the
latest in a series of attempts to find another Emerging Market grouping after
the BRICs.
----The MINTs, like the BRICs, are in many ways an odd grouping. They represent an attempt to put together an alternative to the BRICs in each of the main emerging market regions: Mexico in Latin America, Indonesia in Asia, Nigeria in Sub-Saharan Africa and Turkey in emerging Europe.
Whereas the BRICs consisted of
the largest economies in their respective regions, each of these MINT members
is the second or, in the case of Indonesia, the third, largest economy in its
region.
But the four economies are very
different. Nigeria and Indonesia have large populations – 170m and 250m
respectively. By comparison, both Turkey and Mexico have smaller populations –
just under 80m and 120m respectively.
More importantly, income levels
vary considerably. GDP per head in Mexico is nearly seven times as high as it
is in Nigeria.
More
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
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?
No comments:
Post a Comment