Baltic Dry Index. 1148 -29
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof.
John Kenneth Galbraith.
It’s over! The
District of Crooks’ Fedsters’ decided yesterday to start playing craps. The
Great Gamble is on. At the least, the emerging market shambles will continue,
with Argentina, Brazil, India, Indonesia, Thailand, Turkey and South Africa all
likely to come crashing back to ground. At worst before it’s all over, add in
China, Japan, Russia, and all of Club Med including France. Can the Fed really
end QE and ZIRP without triggering the calamity both voodoo policies were
started to prevent? We are about to find out over the next 11 months of 2014,
though the next few weeks in bond markets will likely be the decider. Time to
swap more paper assets for fully paid up physical gold and silver. The Fed just
made the world’s biggest gamble since Hitler decided to invade Russia. One Hell
of a Time for Bernocchio to quit Dodge. Keep watching the sinking Baltic Dry
Index. It’s off to the worst start of the year since it was first compiled.
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
Jan. 29, 2014, 4:41 p.m. EST
U.S. stocks fall 1%; Dow average loses 190 points
Fed to continue to trim monthly bond purchases by $10 billion
NEW YORK (MarketWatch) — U.S. stocks fell 1% on Wednesday,
extending losses after the Fed announced it will reduce monthly bond purchases
by another $10 billion and failed to mention the recent emerging markets
turmoil that has knocked U.S. stocks off their highs.
The outcome was in line with forecasts, though it may have derailed some
trades betting the Fed would make a nod to the recent market setback. The Fed also signaled that it is likely to keep reducing its
purchases in the coming months, citing a pickup in economic activity and
improvement in the labor market.
More
Asian Stocks Slump on Fed Cuts to Bond Buying, China PMI
Jan 30, 2014 4:26 AM GMT
Asian stocks fell for the fifth time in six days after the Federal
Reserve pressed on with cuts to U.S. economic stimulus and as a
report showed China’s
manufacturing industry contracted. Honda Motor Co., which gets 83 percent of its auto sales abroad, lost 2.6 percent as Japanese exporters retreated after the yen gained from the close of equity markets in Tokyo yesterday. Treasury Wine Estates Ltd. (TWE) slumped by a record 20 percent in Sydney as the world’s second-largest publicly traded wine maker said earnings fell. Hitachi Metals Ltd. surged 4.9 percent in Tokyo, leading gains on the regional benchmark index, after profit at the steel manufacturer topped analyst estimates.
The MSCI Asia Pacific Index lost 1.6 percent to 134.54 as of 12:23 p.m. in Hong Kong, with all 10 industry groups on the gauge falling. The measure has dropped 4.8 percent in January, on course for the biggest monthly slump since May as part of a global equities rout sparked by weaker-than-expected economic data from China and a sell-off in emerging-market currencies.
“Given the likelihood of continued Fed tapering in the period ahead, there appears little doubt that long emerging market positions are likely to be subjected to near-term pressure,” Matthew Sherwood, Sydney-based head of investment markets research at Perpetual Ltd., which manages about $25 billion, said in an e-mail, referring to bets on gains in developing-nation assets. “What we are seeing at present is a global re-pricing of risk.”
More
http://www.bloomberg.com/news/2014-01-30/asian-stocks-decline-as-fed-cuts-bond-buying-yen-gains.html
Jan. 29, 2014, 8:42 a.m. EST
South Africa central bank hikes rates to 5.5%
NEW YORK (MarketWatch) -- The South
African Reserve Bank on Wednesday raised its repurchases rate by 50 basis
points to 5.5% as of January 30, as the bank sought to stem turbulence caused
by the withdrawal of U.S. monetary stimulus and fears of a growth slowdown in
China. The bank said a sustained depreciation of the rand will
"significantly" raise the risk to the inflation outlook. "Our
inflation forecast shows a marked deterioration, despite the absence of clear
evidence of domestic demand pressures," the bank said in a statement. The
bank emphasized that monetary policy remains accommodative and further changes
will be highly dependent on data. The dollar rose to 11.3493 rand from 10.9301
rand late Tuesday, according to FactSet, despite initially moving lower
intraday after the hike.
World risks deflationary shock as BRICS puncture credit bubbles
As matters stand, the next recession will push the Western economic system over the edge into deflation
Half the world economy is one
accident away from a deflation trap. The International Monetary Fund says the
probability may now be as high as 20pc.
It is a remarkable state of
affairs that the G2 monetary superpowers - the US and China - should both be
tightening into such a 20pc risk, though no doubt they have concluded that
asset bubbles are becoming an even bigger danger.
----It is not hard to imagine what that shock might be. It is already before us as Turkey, India and South Africa all slam on the brakes, forced to defend their currencies as global liquidity drains away.
The World Bank warns in its
latest report - Capital Flows and Risks in Developing Countries - that the
withdrawal of stimulus by the US Federal Reserve could throw a "curve
ball" at the international system.
"If market reactions to
tapering are precipitous, developing countries could see flows decline by as
much as 80pc for several months," it said. A quarter of these economies
risk a sudden stop. "While this adjustment might be short-lived, it is
likely to inflict serious stresses, potentially heightening crisis risks."
The report said they may need
capital controls to navigate the storm - or technically to overcome the
"Impossible Trinity" of monetary autonomy, a stable exchange rate and
free flows of funds. William Browder from Hermitage says that is exactly where
the crisis is leading, and it will be sobering for investors to learn that
their money is locked up - already the case in Cyprus, and starting in Egypt.
The chain-reaction becomes self-fulfilling. "People will start asking
themselves which country is next," he said.
Emerging markets
are now half the global economy, so we are in uncharted waters. Roughly $4
trillion of foreign funds swept into emerging markets after the Lehman crisis,
much of it by then "momentum money" late to the party. The IMF says
$470bn is directly linked to money printing by the Fed . "We don't know
how much of this is going to come out again, or how quickly," said an
official from the Fund.
One country
after another is now having to tighten into weakness. The longer this goes on,
and the wider it spreads, the greater the risk that it will metamorphose into a
global deflationary shock.
----As matters stand, the next recession will push the Western economic system over the edge into deflation.
The US has a slightly bigger buffer,
but not much. Growth of M2 money has been slowing even faster than it did in
the nine months before the Lehman crash in 2008, but then the Fed no longer
pays any attention to such data so it may all too easily repeat the mistake.
The Fed is surely courting fate with $10bn of bond tapering each meeting into
the teeth of incipient deflation, as Minneapolis Fed chief Narayana
Kocherlakota keeps warning.
Those who think deflation is
harmless should listen to the Bank of Japan's Haruhiko Kuroda, who has lived
through 15 years of falling prices. Corporate profits dried up. Investment in
technology atrophied. Innovation fizzled out. "It created a very negative
mindset in Japan," he said.
More
Record Cash Leaves Emerging Market ETFs on Lira Drop: Currencies
Jan 30,
2014
Investors are pulling money from exchange-traded funds that track emerging
markets at the fastest rate on record, as China’s
slowing growth and cuts to central-bank stimulus sink currencies from Turkey to Brazil. More than $7 billion flowed from ETFs investing in developing-nation assets in January, the most since the securities were created, data compiled by Bloomberg show. The iShares MSCI Emerging Markets ETF (EEM) has seen its assets shrink by 11 percent, while the Vanguard FTSE Emerging Markets ETF is poised for the biggest monthly redemption since the fund was started in 2005. The WisdomTree Emerging Markets Local Debt Fund is on track for an eighth straight month of withdrawals.
Investors accelerated redemptions after data showed Chinese manufacturing contracted and Argentina’s unexpected devaluation of its peso dented confidence in Latin America. Surprise rate increases by central banks in Turkey and South Africa failed to boost their currencies, while the U.S. Federal Reserve opted to press on with reductions to its monetary stimulus.
More
China Manufacturing Index Shows Contraction
Jan 30, 2014 4:04 AM GMT
A Chinese manufacturing gauge signaled the first contraction in six months
in January as companies cut jobs and credit-market stresses damped confidence
in the world’s second-biggest economy. A Purchasing Managers’ Index fell to 49.5 from 50.5 in December, HSBC Holdings Plc and Markit Economics said in a statement today. The reading compared with the median 49.6 estimate in a Bloomberg News survey of 14 economists. A number below 50 indicates contraction.
The Australian dollar and copper fell as the survey showed manufacturers eliminating jobs at the fastest rate in almost five years. Credit Suisse Group AG this week cut its first-quarter growth forecast for China, citing anecdotal evidence of “surprisingly slow” retail sales ahead of the week-long Lunar New Year holiday, which starts tomorrow.
“China’s growth momentum will continue to weaken in coming quarters,” Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, said in a note. “The market continues to underestimate the degree of the ongoing slowdown and further negative surprises are in stock as the year progresses.”
More
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith
At the Comex
silver depositories Wednesday
final figures were: Registered 49.93 Moz, Eligible 129.51 Moz, Total 179.44 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, Brexit it is, thank God. Or should that be thank President Love Rat?
C'est la fin des haricots
Francois Hollande says 'non' to treaty change before the EU referendum
David Cameron will have to wait years to re-write the terms of Britain’s membership of the European Union, says Francois Hollande
By Henry Samuel in Paris, and
Christopher Hope in London 6:37PM GMT 29 Jan 2014
David Cameron will have to wait
years to re-write the terms of Britain’s membership of the European Union,
Francois Hollande has said.
The French President’s officials
poured scorn on suggestions from Mr Cameron can achieve “treaty change” before
any in/out referendum, which he has committed to hold before the of 2017.
The remarks will raise tensions
between London and Paris, ahead of an Anglo-French summit – part of which will
be held in over a working lunch in pub in Oxfordshire - on Friday this week.
The Prime Minister has said he
wants to renegotiate the UK’s relationship with the EU and then put it to a
vote of the British people in 2017.
Mr Cameron has suggested that as
long as the renegotiation – which will involve changing treaties between
Britain and the EU - is successful he will he will campaign for Britain to
remain in the EU.
But in a briefing for journalists
in Paris ahead of the summit, a senior source close to Mr Hollande said any
treaty change was “very, very unlikely” before 2017.
The official said: “This doesn’t
mean we won’t one day require treaties to be revised for the requirements of
economic monetary union, but it is very, very unlikely this will be compatible
with the British political calendar.”
The official continued: “It’s in
our interests that Britain remains within Europe, but it is not by changing the
treaties or rules will negotiate its place in the EU. It is in our interests
that Britain remains within Europe but that cannot happen at the price of
dismantling Europe.”
---- Tomorrow’s talks between Mr Cameron and Mr Holland will take place in a pub near the Brize Norton air base, followed by a press conference.
The pair are due to announce a
series of defence agreements on drones, energy and space as well as “progress”
on creating a combined joint expeditionary force at bilateral summit between
François Hollande and David Cameron on Friday.
The Anglo/French summit, the
first to be held in the UK for four years, will be held mainly at RAF
Brize-Norton in Oxfordshire, the Royal Airforce’s largest airbase and will
focus on outlining progress in defence cooperation.
The two countries are due to sign
a Euro500m memorandum of understanding to build anti-ship missiles for French
and British attack helicopters.
The leaders will also sign up to
two years of research and specifications on an unmanned fighter jet known as
the “future combat air system” and developed by BAE Systems and Dassault
Aviation.
The French are calling this the
“first phase” in the construction of the “pilotless plane of the future”.
A third memorandum of
understanding will be announced on jointly developing a light underwater vessel
capable of detecting mines under the sea.
The leaders are due to confirm
“progress” on creating a combined joint expeditionary force of 10,000 men by
2016, as well as further counter-terror co-operation.
More
Q:
Did you hear about the Frenchman who jumped into the river in Paris?
A: He was declared to be in Seine.
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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