Baltic Dry Index. 1369 -59
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
World economy 'set for good 2007'
By Tim Weber Business
Editor, BBC News website, Davos
The global economy
is set for a good 2007, leading economists have forecast at the World Economic
Forum in Davos.
Strong growth in
Europe and the Asia Pacific region should balance a possible slowdown in the
US.
The experts also
identified risks: a weak US housing market, rising oil prices and soaring
interest rates.
However, the world
was also better prepared to cope with any fallout, they said, because
globalisation had removed imbalances in the world economy.
Irrational exuberance
is back. Or more correctly, though it never ended, it’s back with a vengeance
now, fuelled by QE Forever being the only game in town. Even France and the ECB
are promising to climb on the bandwagon, just as the BOE and the Fed say that
they are about to jump off. Not that anyone believes them of course. Too big to
fail or jail corporate socialism is alive and thriving. Shame about the
downwardly mobile middle class and pensioners, tossed under the bus of ZIRP.
Below, Mr.
Buffett makes a large derivatives bet. Yes that Mr. Buffett of “financial
weapons of mass destruction” fame. Stay long physical gold and silver. We all
know the ending of this gambling madness just not the timing.
Buffett Makes Millions Selling 500-to-1 Monkey-Linked Derivatives
Jan 21, 2014 10:14 PM GMT
Much as bankers are in the business of putting cheap funding to work, bloggers
are in the business of putting cheap irony to work, and one of the cheapest of
ironies has long been that Warren Buffett (1) has called derivatives
"financial weapons of mass destruction" and (2) has been known to
dabble in the occasional high-proof derivatives trade himself. Selling long-dated
S&P 500 puts is perhaps the best-known example, though he'll buy
big
chunks of bank
warrants too if the situation calls for it.And in that vein, this Wall Street Journal item is a delight: Buffett's Berkshire Hathaway Inc. is insuring a $1 billion prize that Quicken Loans has offered to pay to anyone who can pick a perfect NCAA basketball tournament bracket. Because oh, sure, derivatives are evil, but let's bet a billion dollars on an essentially random outcome!
The first thing to talk about here is pricing, because it's fun. If you were Berkshire, how much would you charge for this $1 billion policy? The answer to that starts -- though it does not end -- with the related question, "what is the fair price of this $1 billion policy?" The answer to that question is $1 billion times the probability that someone will actually win the contest.1
My Bloomberg View colleague Kavitha Davidson says that the odds of picking a perfect bracket are about 1 in 9 quintillion. That's just the odds of a random bracket winning, though, and would only be the true odds if the NCAA tournament were decided by a series of unbiased coin flips, which would make for very boring television. (I would watch!) More reasonable guesses -- cutting out brackets that have 16 seeds winning or whatever -- range from 1 in 772 billion to 1 in 128 billion. Odds of 1 in 128 billion imply a fair price for Buffett's billion-dollar policy of just under a penny.
----Figure Berkshire should get paid a couple of million bucks on this, which squares with reports that it previously insured a billion-dollar contest run by Pepsi that had 1-in-1,000 odds (fair price of $1 million) for "a seven-figure premium."
Now let's ask this question: What would you say about a bank that did a derivatives trade where it took on $1 billion of risk in exchange for a payment of a few million dollars? What if that risk was binary risk generated by a random number generator? The NCAA Tournament is not strictly speaking a random number generator (though it's close!), but that billion-dollar Pepsi contest was literally for matching a random number. Drawn by a monkey. Really, a chimpanzee would pick the number. On television, apparently.
Imagine the outrage you could get with a story titled "Goldman Sachs Makes Millions Selling 500-to-1 Monkey-Linked Derivatives"!5
More
Next, the economic
view from Davos. The Great Disconnect will continue. Even Pope Francis
approved, albeit in a very back handed way. The view from the limo, five star hotel and private jet, is very
different to the rising anarchy, violence, strikes, crushing debt, and
spreading social discord, that I see presented on TV just about every day. One
or the other has to be wrong.
Davos Billionaires See Wealth Gains on 2014 Stocks Rally
Jan
21, 2014 11:15 PM GMT
Billionaires attending the World Economic Forum’s annual meeting this week in
Davos, Switzerland, expect to be richer when they return to the Alpine village
next year. About a half-dozen of the wealthiest participants, including Aliko Dangote, Africa’s richest person, and Irish telecommunications mogul Denis O’Brien, said stocks will rise, interest rates will remain low and they’d avoid investing in the virtual currency Bitcoin in 2014.
“The bull market will continue, we’ve actually turned the corner,” Dangote said in an interview at the forum’s Congress Centre last night. “I believe it’s going to be a whole new ballgame. Things are improving in all sectors: in banking, in vehicle manufacturing, almost all the sectors. And I think we’ve left the bad past behind.”
Dangote is one of at least 80 billionaires joining more than 2,500 business and political leaders in Davos this week, according to a list of attendees and promotional materials obtained by Bloomberg News.
----The wealthiest people on the planet got
even richer last year, adding $524 billion to their collective net worth,
according to the Bloomberg Billionaires Index, a daily ranking of the world’s
300 wealthiest individuals. The aggregate net worth of the world’s top
billionaires stood at $3.6 trillion at the market close yesterday, according to
the ranking.
A study by UBS AG economist Paul Donovan last month found that pretax income of the top one percent of Americans amounts to about 20 percent of all U.S. income, which is comparable with levels in the early 20th century.
Using Gini coefficients to measure income inequality, Donovan found those for the U.S., U.K., Japan, France and Canada have each risen since 2005.
More
Pope Gives Davos His Blessing in Message on Wealth Distribution
Jan 21, 2014 6:26 PM GMT
Pope Francis blessed the World Economic Forum in Davos,
Switzerland, in a letter that urged the participants to push for greater wealth
distribution and remedies to include those left behind. “We must recognize the fundamental role that modern business activity has had” in improving global well-being, Francis said in the message, which was sent by e-mail today. “Nonetheless, the successes which have been achieved, even if they have reduced poverty for a great number of people, often have led to a widespread social exclusion.”
The Roman Catholic leader won’t be attending the forum this week. The Argentinian pope, elected last year, is making the gap between rich and poor a focus of his pontificate. In November, he condemned “trickle down” economic theories, saying it’s incorrect to assume policies that help the rich will eventually help the poor.
Francis, 77, called on leaders to create the conditions for greater employment and a “better distribution of wealth” in today’s letter. He also said it was “intolerable” that thousands die from hunger every day.
More
Below, just as the Davos “Catholic” party gets going, along comes some modern day Martin Luther to spoil the party. Below, Andy Xie “strongly disputes the claim that freedom from God's punishment for sin could be purchased with monetary values,” to misquote Wikipedia. Keynes is dead, he proclaims, in more ways than one.
Jan. 22, 2014, 12:43 a.m. EST
Breaking out is hard to do
Commentary: World’s top economies wait for each other to act
By Andy Xie
BEIJING ( Caixin Online ) — The global
economy is unlikely to accelerate in 2014. The hope that the U.S. economy is
reaching escape velocity won’t pan out. Abenomics is likely to fizzle out in
2014. Emerging economies will likely remain in low gear. The chances are that
the global economy, as weighted by nominal GDP at current exchange rates, will
grow at 2%.
Globalization,
turbo-powered by information technology, has cut short the feedback loop
between demand stimulus and supply response. Any growth response to demand
stimulus is short-lived, as past five years has demonstrated.
Holding
down costs of non-tradeables like housing, health care and education is the key
to economic competitiveness and sustainable growth. Any economy that grows on
inflating such non-tradeables through stimulus will pay back with low growth
later.
Keynes is dead
The
year began with much hope that the U.S. economy would be strong enough to carry
the global economy forward, just like in the old days. The United States has
been gaining momentum with a strong third-quarter growth rate and a string of
good employment data. The euphoria was broken by a very poor non-farm payrolls
report last week. Some blamed it on cold weather. There may be some truth to this.
Nevertheless, the idea that U.S. economic momentum is snowballing is in doubt.
I
have argued for many years that this round of globalization has fundamentally
changed how an economy works, even for a large one like the United States.
While demand is and always has been local, the supply side has become genuinely
global. Both manufacturing blue-collar jobs and most white-collar jobs have
become global.
----While the
jury is still out, I believe that the U.S. economy is likely to grow at a
similar pace in 2014 as in 2013, say, between 2% and 2.5%. The dream of
economic momentum snowballing as in the 1990s will remain just a dream.
More
Next. There may
be trouble ahead, as in as soon as tomorrow. While strikes don’t tend to last
long in much troubled modern South Africa, much of the west has already dumped its
former gold holdings into Russia and Asia. Will a South African miners’ strike lead
to a default at the LBMA?
Strike would cripple gold industry, as many voice concerns
By: Natasha Odendaal 21st
January 2014
JOHANNESBURG (miningweekly.com) – As the Association of Mineworkers and Construction
Union (AMCU) gear up to lead a strike in the gold and platinum mining sectors
from Thursday, concerns are being voiced that labour unrest could unhinge an
already strained industry.As multiple mining majors brace for a strike, the Chamber of Mines (CoM) and Finance Minister Pravin Gordhan, besides others, raised their concerns over the turbulent labour market, with trade union Solidarity warning that the AMCU-initiated protected strikes could cripple the industry.
The Congress of the People labour spokesperson Diratsagae Papi Kganare said, while it recognised and respected AMCU’s constitutional right to strike, should the strike go ahead as planned, the South African economy “will suffer dire consequences”.
Government called for all parties involved in the current wage dispute to “engage in meaningful negotiations” to resolve the dispute and encouraged the “protest” to be within the confines of the law, acting GCIS CEO Phumla Williams said in a statement.
“As South Africa remains a destination for investment and business opportunities, government urges the parties to resolve their disputes promptly in the interest of the country’s economy,” she added.
By first shift on Thursday, it was expected that over 100 000 workers across the gold and platinum sector would down tools in the AMCU-led protected strike, with gold producer Harmony Gold’s Kusaselethu and Masimong mines, Sibanye Gold’s Driefontein mine and AngloGold Ashanti’s South Africa operations, as well as platinum producers Lonmin, Impala Platinum (Implats) and Anglo American Platinum (Amplats) being impacted.
More
We end for
the day, with more on the wealth destroying, one German size fits all, Bilderberger
driven political euro. The EUSSR is “increasing
unemployment and social hardship” says the European Commission. The UK can
thank God for Gordon Brown and his loathing and hatred of Tony Blair.
Euro 'increasing unemployment and social hardship', says EC
Deepening economic divisions between North and South, rich and poor eurozone countries threaten to undermine the European Union itself, report states
Europe’s single currency is fuelling inequality, and the loss of sovereignty entailed in eurozone membership has led to “increased unemployment and social hardship” in many countries, a European Commission report has revealed.The 496-page report, “Employment and social developments in Europe 2013”, warns that deepening economic divisions between North and South, rich and poor eurozone countries threaten to undermine the European Union itself.
The stark findings, published by Laszlo Andor, the EU’s social affairs commissioner, acknowledges that the loss of sovereignty involved in giving up national currencies has led to a loss of flexibility in tackling the economic crisis.
With the loss of the ability to devalue national currencies to increase competitiveness, eurozone members have been forced to drive down living standards to a degree that is historically unprecedented since the 1930s - Greece has seen incomes collapse by more than 30pc.
“In the absence of the currency devaluation option, euro area countries attempting to regain cost competitiveness have to rely on internal devaluation (wage and price containment),” the report concluded.
“This policy, however, has its limitations and downsides, not least in terms of increased unemployment and social hardship.”
Martin Callanan, the leader of the European Conservative and Reform Group of MEPs, praised the report for its honesty of the consequences of euro membership.
“This is an astonishing admission from a commissioner that will be regarded as heresy in the European institutions,” he said.
----In a criticism of the European Central Bank and the commission’s own policy, the report also concludes that internal devaluation is not working and has fuelled continued recession in the eurozone, which has fallen severely behind the US and Britain in terms of economic growth.
More
Top bosses fear global recession
By Tim Weber Business
editor, BBC News website, Davos 2008
A global recession
has now become the biggest threat to companies, according to a global survey of
top chief executives.
Business confidence
is also falling for the first time in five years, according to
PricewaterhouseCoopers' survey.
The corporate
gloom, however, is limited to bosses in the United States and Western Europe.
In Asia business
confidence is soaring, with 90% of Indian bosses saying they are "very
confident".
While confidence
numbers are down overall, half of all chief executives still claim to be
"very confident" about their company's future. That is twice the
level of 2003, the last time confidence levels were falling.
http://news.bbc.co.uk/1/hi/business/7202998.stm
At the Comex
silver depositories Tuesday
final figures were: Registered 49.59 Moz, Eligible 127.52 Moz, Total 177.11 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on NSA spying. NSA spying has killed
off much of the USA’s high tech sector.
“I
would argue, by the way, if the French citizens knew exactly what that was
about, they would be applauding and popping Champagne corks. It’s a good thing.
It keeps the French safe. It keeps the U.S. safe.”
House Intelligence Committee Chairman Mike
Rogers (R-Mich.), Oct. 27
The strange connection between the NSA and an Ontario tech firm
OMAR EL AKKAD -
TECHNOLOGY REPORTER
The Globe and Mail Last updated Monday, Jan. 20 2014, 7:49
AM EST
At the heart of digital security is the concept of encryption – making
information indecipherable to anyone who doesn’t have the right passcode.And since 1995, any software developer building encryption for technology they intended to sell to the American or Canadian government has had to consult something called the Cryptographic Module Validation Program. It’s a list of algorithms blessed by the CMVP that are, according to the government agencies that publish it, “accepted by the Federal Agencies of both countries for the protection of sensitive information.”
There’s only one problem. For more than six years, one of the central items listed in the CMVP – an algorithm for generating the random numbers that form the foundations of an encryption scheme – has had a glaring and well-known backdoor, a means of rendering the encryption totally ineffective.
“This has been known since 2006,” said Steve Marquess, co-founder of the OpenSSL Software Foundation. “Why the heck was this officially blessed? A lot of my colleagues and a lot of people in the cryptography community are asking that question.”
Today, many of those people are coming to the conclusion that the flaws in the algorithm were not the product of sloppy work, but deliberately inserted to make it easy for at least one spy agency – the National Security Agency – to break the encryption.
Because the algorithm in question made it onto the CMVP, it was used by dozens of technology companies looking to make their products government-approved.
Such companies include BlackBerry Ltd. – which not only uses the algorithm, but also owns the patent on the concepts that form its foundations.
In addition to BlackBerry, companies such as RSA Security LLC, Cisco Systems Inc., Samsung Electronics Co. Ltd., Symantec Corp. are all known to have implemented the algorithm in some of their products.
And the revelation that American and Canadian agencies (the CMVP is a joint venture between the U.S. National Institute of Standards and Technology and the Communications Security Establishment Canada) gave its blessing to a compromised encryption scheme has erupted into a major scandal within the cryptography community, the roots of which can be traced back to a Mississauga computer security firm.
In early 2005, two employees at Mississauga-based Certicom Corp. began filing a patent application for a type of random number generator using a mathematical concept called elliptic curves. The patent also described another functionality – a set of keys that could be used, for example, by “trusted law enforcement agents” to do an end-run around the encryption. (Dan Brown, one of the Certicom employees who filed the patent, did not respond to a request for comment.)
At the time, the patent generated relatively little interest. But in 2007, the NIST released its new list of approved encryption algorithms. There were four items on the list, one of which was called Dual Elliptic Curve Deterministic Random Bit Generator, or Dual_EC_DRBG for short.
From the very beginning, cryptographic researchers noticed something strange about
Dual_EC. In 2007, two Microsoft researchers showed that the algorithm contained a set of constants that, when combined with a secret key, could essentially break the encryption generated by Dual_EC. In effect, Dual_EC implemented in the real world a version of the backdoor described in the Certicom patent.
Nobody could say for certain who had the secret key. But the very existence of such a backdoor caused security researchers to strongly urge a boycott of Dual_EC.
“While we were saying don’t use it, don’t use it, government contractors were demanding it,” security researcher Bruce Schneier said.
For years, many wondered why the NIST in America and CSEC in Canada would continue to give their official blessing to a compromised algorithm. Last year, a potential answer to that question emerged, when documents leaked by Edward Snowden revealed the NSA to be a holder of the Dual_EC secret keys – essentially, allowing the spy agency to crack the encryption at will. In addition, a Reuters report in December revealed that the NSA had paid RSA Security LLC $10-million to continue making Dual_EC the default form of encryption on its products.
More
Probing America: Top German Prosecutor Considers NSA Investigation
By SPIEGEL Staff January 20, 2014 – 05:49 PM
Germany and the US appear to
be edging closer to political confrontation. The Federal Prosecutor says there
is sufficient evidence to open a politically explosive investigation into NSA
spying on Chancellor Angela Merkel's mobile phone.
Last
Tuesday, on the sidelines of an Social Democrat party caucus in Berlin, German
Justice Minister Heiko Maas ran into Foreign Minister Frank-Walter Steinmeier.
Maas pulled his fellow SPD member aside and warned him about what could become
a difficult matter. "Something may be coming our way," Maas
whispered, and noted that the foreign minister could be affected as well.
Germany's federal prosecutor, Maas intimated, is currently considering opening
an investigation into the scandal surrounding the surveillance of Chancellor
Angela Merkel's mobile phone by US intelligence. It's a step that would
undoubtedly be considered an affront by the Americans.
More
Manipulating the Entire IPO Market With Just $250 Million
Tech isn’t exactly booming, as we’ve seen from numerous revenue and earnings debacles. Most recently, Intel’s: revenues were down 1% from 2012 and 2.4% from 2011. Net income was down 13% from 2012 and 25% from 2011. Looking forward, they’d be flat, CEO Brian Krzanich warned. In 2013, the PC industry just saw its worst decline in shipments ever.Dell and HP announced big layoffs. Other tech companies too are “realigning” their workforce. And after rumors started spinning out of control on Friday, Intel confirmed that it too would axe 5% of its workforce of about 105,000 “to align our resources to meet the needs of our business.” Revelations of how the NSA has compromised products and services of US tech companies caused orders to collapse in China, Russia, and other countries, where orders were supposed to grow at big double-digit rates. It left IBM, Cisco, and brethren with a mess on their hands [read.... Costs Of NSA Scandal To Bleed US Tech For Years].
But that hasn’t kept valuations of tech startups from being pushed into the stratosphere. Turns out, it’s relatively easy these days. By the stroke of a pen and $250 million, an elite club decided amongst each other that the “valuation” of on-line storage provider Dropbox was close to $10 billion.
More
“We
want the truth. It is not in the least bit conceivable that activity of this
type could be acceptable.”
Italian Prime Minister Enrico
Letta to reporters, Oct 24
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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