Baltic Dry Index. 1217 -29
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“If the financial system goes down, our business is going down and,
trust me, yours and everyone else’s is going down, too.”
Lloyd Blankfein
They came,
they saw, they blinked! Someone twisted the arm of China’s giant ICBC bank to
indirectly bailout the first potential Chinese Trust default since 1998. At a
mere USD 500 million and sold to sophisticated investors, China’s shadow
banking system is now so frail that a mere 500 million default threatens to
collapse the whole house of cards, apparently. China has apparently taken to
heart, the Anglo-American corporate socialist lessons of 2008.
Stay long
fully paid up physical precious metals. The Great Nixonian Error of fiat money
just took a giant leap for mankind closer to its ending. One down and only the two
day Fed meeting starting later today, to go. Will the Fed be next to blink?
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
China’s Rescue of Troubled Trust May Stoke Risk-Taking
Jan 28, 2014 6:15 AM GMT
China’s eleventh-hour
rescue of wealthy investors in a high-yield trust threatens to drive more money
into the nation’s $6 trillion shadow-banking industry, undermining regulators’
efforts to deter excessive risk-taking. Industrial & Commercial Bank of China Ltd. (601398), the nation’s largest lender, yesterday told customers who had invested in the 3 billion-yuan ($496 million) trust product that they can sell their rights to unidentified buyers to recoup the principal. Some clients plan to visit ICBC branches to demand more interest ahead of tomorrow’s 5 p.m. deadline for accepting the offer, according to Du Ronghai, a Guangzhou-based investor.
Averting the nation’s biggest trust default may reinforce investors’ belief in implicit guarantees and the government’s backing of such risky products, stoking their appetite for products in the $1.67 trillion trust market. The bailout underscores the pressure on authorities to maintain financial and social stability even as they aim to prune the government’s role in the world’s second-largest economy and curtail debt.
“The rescue brings short-term relief to the market at the cost of brewing a long-term crisis,” said Zhang Jian, a Beijing-based strategist at BOC International Holdings Ltd. “It aggravates the moral-hazard problem and makes it almost risk-free for investors to pump money into trusts, wealth management products and other shadow-banking sectors.”
More
http://www.bloomberg.com/news/2014-01-28/china-s-rescue-of-troubled-trust-may-stoke-risk-taking.html
China's Rich Know Bailouts Equal Gold No. 1
Jan 27, 2014 6:20 PM GMT
One of the nice things for wealthy
people in China is that mysterious, unidentified third parties occasionally
swoop in at the last minute to bail them out of investments that are about to
default. And they do such generous things for the good of the country and its
financial system, of course.
China's rich are fortunate to have this backstop, too. Just last week the chairman of Industrial & Commercial Bank of China Ltd. was saying the lender wouldn't compensate investors in the 3 billion-yuan ($496 million) Credit Equals Gold No. 1 high-yield trust product that it distributed. "I believe this incident has been a very good opportunity to educate the investors, to educate the trust companies and to educate ICBC," Jiang Jianqing told CNBC while at the World Economic Forum in Davos, Switzerland. In the future, he said, if customers buy "wealth management products or other products they must see clearly the risks."
Teaching them a lesson may have to wait, though, because now it looks like the fund's investors will get some sort of payout, although it isn't clear who will do the paying or how much the payout will be. But minor details like those don't seem to be important right now, because what matters to the Chinese government is preventing the global capital markets from having a panic attack about the country's shadow-banking system.
More
In America,
it’s all down to a coin toss. Heads we do nothing, tails we cut another 10
billion off the Fedster’s QE Hail Mary program, and cross our fingers and wait
to see who falls out of the trees. Welcome to our new lawless age 21st
century style. Not for nothing is economics the dismal science.
Jan. 27, 2014, 8:51 a.m. EST
Nothing will deter Fed from tapering this week
Market volatility will not persuade them to slow down reduction in asset purchases
WASHINGTON (MarketWatch) —
Neither snow, freezing temperatures, market volatility nor a lousy jobs report
will stay the Federal Reserve from taking another small step towards the exit
this week.
Federal Reserve officials will
likely agree on another $10 billion taper to its bond-purchase program after a
two-day meeting that ends Wednesday. That’s the same pace as the first
reduction announced in December and it will bring the monthly purchases down to
$65 billion per month, consisting of $35 billion of Treasurys and $30 billion
or mortgage backed securities.
“I think the Fed is desperate to
extract itself from quantitative easing, and it will continue to scale back the
program and end it this year,” said Bernard Baumohl, chief global economist of
the Economic Outlook Group, in an interview.
Fed chairman Ben Bernanke
indicated the Fed wanted to taper at a similar pace to the December move and
“now they’ll start off on that road,” agreed Nigel Gault, co-chief economist at
The Parthenon Group in Boston.
The tumble in the stock market
over the past two days will not deter the Fed from tapering again, analysts
said.
More
Up next,
anyone remember Cyprus? They certainly do in Frankfurt. Germany gets ready to
stick it to the French. Add in the Italians, Spanish, Belgians and Portuguese,
and you’ve got to be the Muppet of all Muppets to be banking over the guarantee
limit in any of Europe’s banks.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
Bundesbank calls for capital levy to avert government bankruptcies
FRANKFURT(Reuters) - Germany's Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.
The Bundesbank's tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households' average net wealth is higher than in Germany.
"(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required," the Bundesbank said in its monthly report.
It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency.
The International Monetary Fund discussed the option in a report in October and said that reducing debt ratios to end-2007 levels for a sample of 15 euro area countries, a tax rate of about 10 percent on households with positive net wealth would be required.
The German Institute for Economic Research calculated in 2012 that in Germany a 10-percent levy on a tax base derived from a personal allowance of 250,000 euros would add up to around 230 billion euros. It did not give a figure for crisis countries due to lack of sufficient data.
Greece has been granted bailout funds of 240 billion euros from the euro area, its national central banks and IMF to protect it from a chaotic default and possible exit from the euro zone. Not all funds have been paid out yet.
In Germany, however, the Bundesbank said it would not support an implementation of a recurrent wealth tax, saying it would harm growth.
Recent reforms and adjustments in the euro zone's struggling
countries - Ireland, Greece, Spain, Italy, Cyprus and Portugal - have improved conditions for sustainable growth, the Bundesbank said, but remained concerned about high debt levels.
It was still a key challenge to drive down public as well as private debt and the ECB's upcoming bank health checks could help to address current problems in the banking sector.
A successful test could also help to wean banks in the euro zone periphery countries off ECB funding, the Bundesbank said.
"It is not the purpose of European monetary policy to ensure solvency of national banking systems or governments and it cannot replace necessary economic adjustments or bank balance sheet clean ups," the Bundesbank said.
http://www.reuters.com/article/2014/01/27/us-eurozone-crisis-bundesbank-idUSBREA0Q0HV20140127
Derivative
gambling is back. In the socialist, taxpayer subsidised world of bankster derivatives
gambling, what could possibly go wrong? No chance, I suppose, that the bet was
placed by the NY Fed’s dealing desk, either directly or more likely indirectly,
in an effort to condition the market? They wouldn’t do that would they? Still
it’s only fiat money, and there’s plenty more where that comes from.
"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."
Oakley R. Bramble
Trader Sells VIX Calls in Day’s Biggest Bet on Options
Jan 27,
2014 10:17 PM GMT
An investor sold about $18 million in calls on the Chicago Board Options
Exchange Volatility Index, a strategy that will be profitable as long as the
VIX doesn’t keep extending last week’s surge. The trade included the sale of 250,000 February 22 calls for about 70 cents each, according to data compiled by Bloomberg and Trade Alert LLC. It happened after the VIX reached an intraday high of 18.99 around 12:20 p.m. New York time. The investor will keep the proceeds if the VIX stays below 22 and the calls expire worthless.
“It’s impressive in size and it’s impressive in timing,” Henry Schwartz, president of Trade Alert, a New York-based provider of options-market data, said in a phone interview. “Whether it’s an outright bet against the VIX rising or hedge against existing positions is hard to say. It’s a large account for sure.”
Stock-market volatility soared last week after data signaling a possible contraction in China’s factory output and a devaluation of Argentina’s peso shook investor confidence. Emerging-market equities have tumbled since the Federal Reserve signaled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets.
The VIX jumped 46 percent to 18.14 last week, the biggest increase since May 2010. The measure, which tracks the cost of options on the Standard & Poor’s 500 Index, slipped 4 percent to 17.42 today.
The bearish volatility bet was
the biggest single block of options to change hands on U.S. exchanges,
according to data compiled by Bloomberg. Before today, the open interest in the
February 22 call contract was about 181,000.
“The trade was huge,” Mark
Caffray, who brokers contracts on the VIX for clients at Chicago-based PTR
Inc., said in an interview. “To say the least, this trade caught dealers off
guard.”
More
We end for
the day with yet more sign that global interest rates will rise, no matter what
the Fed decides in Washington, District of Crooks, tomorrow. The great central
bank generated, bond and stock market bubble from 1982 onwards, has finally
reached its end. One way or another, interest rates are going to revert to
mean, in the decade ahead.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
India Unexpectedly Raises Rates as Inflation Target Mulled
Jan 28, 2014 6:12 AM GMT
India’s central bank unexpectedly raised its benchmark interest rate to
fight inflation and after the rupee tumbled in the volatility roiling emerging
markets in the past week. Governor Raghuram Rajan boosted the repurchase rate to 8 percent from 7.75 percent, the Reserve Bank of India said today. Only three of 45 analysts in a Bloomberg News survey predicted the move, with the rest expecting no change. He left the rate unchanged last month.
An RBI panel last week proposed adopting a 4 percent target for consumer-price gains by 2016, signaling a need for elevated borrowing costs to stem inflation that’s running close to 10 percent even as the economy struggles. Further tightening isn’t anticipated in the near term if consumer-price inflation slows to 8 percent by March 2015, the central bank said today.
More
"The first requisite of a sound monetary system is that it put the least possible power over the quantity or quality of money in the hands of the politicians."
Henry Hazlitt
At the Comex
silver depositories Monday
final figures were: Registered 50.08 Moz, Eligible 128.90 Moz, Total 178.98 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the Charlie Munger award for gross stupidity
and insensitivity, goes to the man who put the “Perkins” in the California VC firm,
Kleiner, Perkins, Caufield, and Byers. While the top 85 richest people in the
world may have more wealth that the bottom three and a half billion in the
world, who would want to be a member of the Davos ghetto?
There's danger in just shoveling out
money to people who say, 'My life is a little harder than it used to be.' At a
certain place you've got to say to the people, 'Suck it in and cope, buddy.
Suck it in and cope.'
Charlie Munger.
Tom Perkins, knight of trickledown and wearer of stupidly expensive watches, says #sorrynotsorry
Move over Phil Robertson, there’s a new controversy-courting codger in town.Venture capitalist Tom Perkins went on Bloomberg late Monday to address the backlash he’s been suffering for the comparisons he drew between what the 1% are facing now and what the Jews endured during the Holocaust.
He apologized in the way the aristocracy tend to do when confronted with uncomfortable truths. He said he was sorry for using the word “Kristallnacht,” but not for his broader message. Teens have a hashtag for that: #Sorrynotsorry.
You almost felt bad for him, like the Life Call guy who’s fallen and can’t get up. Until he started talking. Just about every word that left his mouth led to multiple facepalms.
Among his comments: He’s a Norwegian knight, called upon to defend Danielle Steel. Kleiner Perkins has gone downhill since he left. He could buy six Rolexes for the price of his watch. The creative 1% is under threat. Each one better than the last.
And the real kicker, the rally cry of the trickle-downers: “Let the rich do what the rich do. That is get richer.” Then he said something about bringing everyone else along with them, but ears had already exploded long before he got to the rationale.
After that, he went straight for the heart strings: “I’m an old man. I look back upon my career with great happiness … the fact that everybody now hates me is part of the game. And I’m sorry about that, but that isn’t what I meant to do.”
A little empathy? Not on Twitter, where the 99% (and at least one of those damn 99% sympathizers) went on a feeding frenzy.
Gold is a great thing to sew into your
garments if you're a Jewish family in Vienna in 1939, but I think civilized
people don't buy gold, they invest in productive businesses.
Charlie Munger.
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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