Baltic Dry Index. 1177 -40
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
I went out to Charing Cross to see Major
General Harrison hanged, drawn, and quartered; which was done there, he looking
as cheerful as any man could in that condition.
Samuel
Pepys. 1665.
It is
decision day among America’s bankster bailout Fedsters’ meeting in Washington,
District of Crooks. Until last week’s emerging market and stock markets
collapse, it was widely held that the Fed would announce another 10 billion
reduction in their QE voodoo program. Now it’s a coin toss as to whether last
week has spooked them into doing nothing, or dam the torpedoes and pressing on
regardless. In February 1994, fallen
guru Greenspan famously miscalculated, and a bond rout ensued, and Orange
County California fell crashing out of the trees. Twenty years on and the
stakes are far higher. Anywhere from Argentina to India, including France,
Italy, Brazil and China, can come crashing out of the trees if the Fedsters’
get this call wrong. The Fed is playing financial Russian roulette today.
Another unintended consequence of the great Nixonian Error of fiat money.
Up first,
the complacent view from Wall Street’s
Great Vampire Squids. Their Muppets have nothing to fear they suggest.
Goldman Sachs Sees Muted Taper Impact on Asian Debt as Fed Meets
Jan 29, 2014 4:19 AM GMT
Goldman
Sachs Group Inc. (GS) says U.S. cuts to unprecedented stimulus will have a
limited effect on the performance of Asian bonds this year, as the Federal
Reserve finishes its first policy meeting of 2014. The central bank will probably trim monthly bond purchases by an additional $10 billion at each Federal Open Market Committee meeting through September, a Bloomberg News survey forecasts, after the body announced initial cuts last month.
“We see the impact of U.S. tapering being relatively muted and domestic factors to come to the forefront,” analysts led by Hong Kong-based Kenneth Ho wrote in a research report dated yesterday. “We expect domestic issues such as growth trajectory, domestic monetary policy, elections and inflation to matter more.”
More
The reality,
in the rest of the world outside of the land between the shining seas. Interest
rates are already rising, with China panicked yesterday into an unwise bailout
of a busted Trust.
Citic Group Unit May Invest in Trust Product, Morning Post Says
Jan 29, 2014 2:24 AM GMT
A unit of Citic Group Corp., a Chinese
state-backed conglomerate, may take part in bailing out investors in a troubled
3 billion-yuan ($496 million) trust product, Oriental Morning Post reported. The transaction is under way, the newspaper reported yesterday, citing a person close to Industrial & Commercial Bank of China Ltd. (601398) The person declined to give the name of the unit or the amount it plans to invest, according to the report.
ICBC, which distributed the product sold by China Credit Trust Co. to its private banking clients, on Jan. 27 told customers that they can sell their rights to unidentified buyers to recoup the principal. China Credit Trust said earlier that it reached an agreement for a potential investment, averting the first trust default in at least a decade.
Two calls to Citic Group’s public relations office in Beijing went answered. The group, China’s largest state-owned investment firm, owns companies ranging from banking to oil exploration and reports directly to the nation’s cabinet.
Investors have until 5 p.m. today to accept the offer on principal repayment. The high-yield trust product, known as Credit Equals Gold No. 1, was structured to raise funds from wealthy investors for a coal miner that collapsed in 2012. The product is due Jan. 31.
A bailout would leave Chinese authorities with problems in the financial system including moral hazard, Standard & Poor’s said on Jan. 24. An opportunity for “instilling market discipline” would be missed, it said.
http://www.bloomberg.com/news/2014-01-29/citic-group-unit-may-invest-in-trust-product-morning-post-says.html
Turkey Raises Rates to End Lira Fall as Basci Defies Erdogan
Jan 29, 2014 12:31 AM GMT
Turkey’s central bank
raised all its main interest rates at an emergency late-night meeting in an
effort to shore up the lira, resisting government pressure and reversing years
of policy aimed at stoking growth. The currency surged after the bank raised the one-week repo rate to 10 percent from 4.5 percent. Investors should treat that as the benchmark, the Ankara-based bank said on its website at midnight, promising to “simplify” policy after an experiment in using a variety of rates left many analysts baffled.
Governor Erdem Basci is fighting to halt a currency run that gained speed amid domestic upheaval and a global rout of emerging markets. Prime Minister Recep Tayyip Erdogan, who said yesterday he’s always opposed higher rates, is caught in a graft scandal that has ensnared several ministers. It spooked investors just as the reduction of monetary stimulus in the U.S. began sucking money out of riskier nations, sending the lira to a record low.
More
Argentina’s Lying Prices Show Capital Control Limits: Currencies
Jan 28, 2014 5:13 PM GMT
When Argentina decided last week to ease limits on dollar purchases, it
became the latest emerging-market nation to acknowledge that capital controls
usually fail in masking an economy’s flaws. Argentina allowed the peso to plunge 15 percent after the central bank began scaling back interventions in the foreign-exchange market on Jan. 22, spurring price increases of as much as 30 percent on consumer goods as international reserves fell to a seven-year low. The black-market price in Argentina rose last week to a record 12.75 pesos per dollar, compared with the official rate of about 8, according to Buenos Aires newspaper Ambito.
“Capital controls signal that a country is very worried about preserving its foreign exchange,” Steve Hanke, a professor of applied economics at Baltimore-based Johns Hopkins University and an adviser to the Argentine government in the 1990s, said in an interview. “That means bad things are in the wind.” The restrictions spawn illegal traffic in the local currency that creates “lying prices” in the economy, he said.
Restrictions on capital flows, ranging from Argentina’s tax on vacations abroad to Malaysia’s stabilizing the ringgit after the 1997 Asian crisis, have had mixed results in boosting investor confidence in a country’s economy. Capital outflow restrictions can be effective “if they are sufficiently comprehensive to slow a sudden ‘rush to the exit,’” according to a report by four International Monetary Fund researchers released this month.
“For the average country, a tightening
of outflow restrictions is ineffective as net outflows increase as a result of
it,” wrote Christian Saborowski, Sarah Sanya, Hans Weisfeld and Juan Yepez,
authors of the IMF report.
More
Argentina Devaluation Gambit Backfires in Worst Bond Rout
Jan 28,
2014 6:20 PM GMT
Argentina’s bond losses
are deepening on concern the nation’s efforts to stem a plunge in foreign
reserves will backfire in the absence of a reduction in government
spending and higher interest rates. The country’s dollar-denominated debt has tumbled 4 percent since Jan. 23, when the government devalued the peso by the most in 12 years. The selloff was the biggest among 58 developing nations tracked by JPMorgan Chase & Co.
Argentina’s move to scale back support for the peso may accelerate the fastest drop in foreign reserves in a decade if the country doesn’t double its 22 percent interest rate to ease demand for dollars and rein in government largess that’s stoking inflation, according to Bank of America Corp.
More
Rajan Signals India Inflation Target Amid Vote Tension: Economy
Jan 29,
2014 4:18 AM GMT
India central bank Governor
Raghuram Rajan signaled he’s preparing to follow through on proposals to make
inflation the bank’s top priority even at the risk of friction with Prime
Minister Manmohan
Singh’s government. Rajan yesterday unexpectedly raised the repurchase rate by a quarter-point to 8 percent a week after a panel he appointed released proposals to reduce Asia’s highest inflation rate to 6 percent by 2016 from about 10 percent now. He made the move even after Finance Minister Palaniappan Chidambaram said in a Jan. 23 interview the central bank has a duty to support growth.
More
Biggest Money Fund Shuns Companies on Default Risk: China Credit
Jan 29, 2014 3:46 AM GMT
China’s biggest money-market fund has cut its holdings of corporate debt by
more than 50 percent and sought safety in deposits as rising borrowing costs
increase the threat of default. “We won’t touch high-risk bonds that can have credit risks,” said Wang Dengfeng, Beijing-based manager at Tianhong Asset Management Co., which oversees the Yu’E Bao fund sold online by Internet billionaire Jack Ma. “Liquidity will remain relatively tight this year, as deleveraging continues to be the central bank’s focus. Authorities’ regulation of the interbank business and shadow banking may result in a period of pain.”
Yu’E Bao, whose 250 billion yuan ($41 billion) of assets make it the world’s 14th-largest money-market fund, cut corporate bills to 1.27 percent of holdings as of Dec. 31 from 3.18 percent on Sept. 30, according to its quarterly report. Bank deposits rose to 92 percent from 85 percent, and Wang said rates for such one-month interbank funds exceeded 6 percent this month. That’s higher than the average one-year AAA corporate yield of 5.86 percent.
People’s Bank of China Governor Zhou Xiaochuan has driven up borrowing costs to reduce appetite for debt, while regulators seek to avoid payment failures by trust funds and local-government financing vehicles. Investors staying away from corporate notes have led to an 18 percent slump in offerings in January from a year earlier, making it harder to refinance even as $427 billion of debt comes due in 2014.
More
Thailand’s Unrest Prompts Investor Shift to Neighbors
Jan 29, 2014 3:14 AM GMT
Three months of political turmoil in Thailand is
starting to benefit neighboring economies, as fund managers pull money from the
country, long-term investments are reconsidered and tourists avoid Bangkok. Foreign investors have withdrawn $3 billion from Thai stocks since protests began Oct. 31, exchange data show. They’ve put $190 million into Indonesian shares in 2014 even after the Jakarta Composite index fell 3.9 percent in two days through Jan. 27 amid an emerging-market selloff.
Thailand has fared relatively worse than Southeast Asian neighbors as global investors shift money from emerging markets amid the Federal Reserve’s plan to cut stimulus
More
Billionaires Fuming Over Market Selloff That Sinks Magnit
Jan 29, 2014 6:41 AM GMT
Two of Russia’s billionaires have had enough of this year’s stock market
selloff. Sergey Galitskiy, the owner of grocery chain OAO Magnit, fumed over his stock’s 19 percent plunge this month, saying on a Jan. 27 conference call that “the market is so crazy that I have to apologize for the best results in history” in 2013. A day later, Oleg Tinkov, the founder of TCS Group Holding Plc, vented on Facebook Inc. that “irrational behavior” was behind the plunge that left the owner of the credit-card issuer down 36 percent since an October initial public offering.
Magnit, Russia’s largest food retailer, is off to the worst start to a year since its 2008 listing in London while TCS has slid since a Nov. 15 report that Russia’s proposed ban on the sale of credit cards by mail would hurt its business. Analysts surveyed by Bloomberg predict record revenue for both companies even as Russia’s economy grows at the slowest pace since a 2009 recession.
----The Bloomberg
Russia-US Equity index of the most-traded Russian shares in the U.S. slid to an
almost five-month low yesterday while RTS index futures dropped 0.1 percent to
133,690 in U.S. hours.
More
We end with a puzzle from China. Why now? Benign or malign?
Is a change in China’s policy coming of is Zhu merely heading back to PIMCO to
replace Mohammed El-Erian?
China’s Foreign-Reserves Investment Chief Said to Depart
Jan 29, 2014 1:10 AM GMT
China’s official in charge
of investing the world’s largest foreign-exchange reserves left the government agency that oversees the
holdings, according to a person with direct knowledge of the situation. Zhu Changhong is no longer an employee at the State Administration of Foreign Exchange, said the person, who asked not to be identified because the matter has not been publicly announced. Zhu left Pacific Investment Management Co., manager of the world’s largest bond fund, about four years ago to become SAFE’s head of investment for the reserves.
The stockpile of reserves has grown by more than 50 percent to $3.82 trillion since the end of 2009 as China intervened to control appreciation in the yuan while capital flowed into the country. Holdings of U.S. Treasuries have increased to $1.32 trillion as of November, up about 47 percent from 2009, according to U.S. figures.
SAFE didn’t immediately respond to a faxed request for comment.
China Business News reported earlier today that Zhu resigned, citing an unidentified person. Zhu, 44, has diversified China’s investments, reducing the proportion of U.S. Treasuries and expanding holdings of U.S. corporate bonds, stocks and real estate as well as bonds of other countries, according to the China Business News report.
More
And so we
await today’s great 50:50 gamble decision, from Uncle Scam’s District of
Crooks.
The monetary theorist John Law introduced paper money to France
in the early eighteenth century. As an historic monetary expansion and
speculative Bubble ensued, Mr. Law was revered. But when he lost
control of his experiment – when his Mississippi Bubble scheme and the French
economy later collapsed – Law was run out of the country. The effects of
this monetary fiasco lingered for decades.
Doug Noland
At the Comex
silver depositories Tuesday
final figures were: Registered 49.83 Moz, Eligible 129.70 Moz, Total 178.53 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
There may be trouble ahead. No
comment needed from me on the following from the UK’s conservative Daily
Telegraph.
State of the Union: Obama pledges to go it alone in 2014
US politics Last updated: January 29th, 2014This State of the Union could turn out to be very significant. Obama began by saying that he wants to work with the Congress. Then he said he didn't expect the Congress to work with him. Then he said that he doesn't care – he'll go ahead and do what he wants to do anyway. Constitutionally, this is troubling. But it promises an interesting year ahead.
The two things that really matter are the minimum wage and Iran. On the minimum wage he's promised an executive order to raise it for federal workers, with the goal of spurring Congress to do the same for everyone else. Good for him. Wages are far too low and there's a sound moral case for a hike. But this aggressive take on the subject, obviously designed to regain control of the political agenda, undoes some of Congress' established right to lead. Likewise, the President made an incredibly bold statement about Iran to the effect that he believes negotiations can work, he will make them work, and he'll veto any congressional effort to scupper them. Again, good for him. But hawks won't like it and it stalls some of the growing assertiveness when it comes to Congress' influence on foreign policy. In short, Obama intends to spend 2014 putting Congress in its place – not something a President is really supposed to do. The opinion of the legislature is supposed to matter.
The imperial decrees matched the spirit of the occasion. As the years go by, the State of the Union more and more resembles a cross between Versailles and the Emmys. Some might say that the endless standing ovations for the Prez, the First Lady's box, the chants of "USA! USA! USA!" are meant to reflect the significance of the office – but it doesn't lend it much dignity. And the significance of Congress is reduced. The event has become a stage for a not-so-subtle culture war. The Republicans brought the star of Duck Dynasty to reflect their ongoing commitment to pretending to watch ordinary people's TV. The Obamas brought a gay basketball player fresh (and, yes, bravely) out of the closet. The whole chamber erupted with applause when the President talked about US athletes attending the Olympics as a display of America's commitment to equality. Vladimir Putin has managed to make Congress gay friendly – quite an accomplishment.
Is all this hoopla what Thomas Jefferson would've wanted? Probably not. But then he never imagined a US in which purchasing healthcare is mandatory or in which the state is locked into a perpetual War on Terror.
By the way, Barack Obama promised to end the Afghanistan conflict and close Gitmo. Again.
Nevertheless, this was an audacious attempt to regain momentum and defy the second term blues, even if the political reality of a Republican House is staked against him. For all his faults, Obama is in his office because the Republicans have failed to provide a convincing alternative.
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Saw a wedding in the church. It was
strange to see what delight we married people have to see these poor fools
decoyed into our condition.
Samuel Pepys.
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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