Baltic Dry Index. 1091 -01
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
Did the USA just go public yesterday, with a big change
in US foreign policy towards Japan and China? For more on that potentially massive
policy shift scroll down to Crooks Corner.
Staying with Asia this morning, we open with a gaggle of
disconcerting red flags. They may not exactly ring a bell at the top of markets
but they certainly wave a lot of red flags. If US policy did in fact switch
against Japan at the weekend via General Carlisle, that sounds like Westminster
Abbey’s 30cwt tenor, death bell tolling to me.
Won Goes From Asia’s First to Worst as Top Forecaster Says Sell
Feb 10, 2014 6:03 AM GMT
South Korea’s won is
leading a drop in Asian currencies this year, after gaining the most in the
second half of 2013, as tapering of U.S. stimulus drains funds from
emerging-market assets and China’s
economy slows. The won has weakened 2 percent since Dec. 31 to 1,071.23 per dollar at the close in Seoul today, according to data compiled by Bloomberg. An 8.8 percent jump in the July-December period was more than six times the gain of any other regional currency. Scotiabank, which had the closest won estimates for the last four quarters in data compiled by Bloomberg Rankings, recommended in a Feb. 5 report that investors bet on further losses this quarter.
More
Singapore Stocks to Extend Region’s Biggest Rout: Southeast Asia
Feb 10,
2014 2:52 AM GMT
Baring Asset Management Co. and Bank Julius Baer & Co. expect a
deepening slump in Singapore stocks, the worst performers this year among
Southeast Asian markets. The benchmark Straits Times Index dropped 4.9 percent from Dec. 31 through last week, trailing gauges of Thai, Indonesian, Malaysian and Philippine equities by at least 1.8 percentage points. Stocks sank as data showed home purchases tumbled last year to a four-year low and retail sales dropped, while manufacturing growth weakened in China, Singapore’s biggest export market.
“The Singapore selloff is due in large part to the sputtering domestic economy,” said David Ross, Maryland, Washington-based managing director of Chevy Chase Trust Co., which oversees about $15 billion. “The weakening consumer economy portends weakness in the property segment that could send ripples through the financial system. While not the most likely scenario, the odds of a bursting property bubble are increasing.”
More
Japan’s December Current-Account Deficit Widens to Record
Feb 10,
2014 1:04 AM GMT
Japan’s current-account
deficit widened to a record in December on soaring imports, adding to Prime
Minister Shinzo Abe’s challenges as he tries to drive a recovery in the world’s
third-biggest economy. The 638.6 billion yen ($6.2 billion) shortfall surpassed November’s gap of 592.8 billion yen, the finance ministry said in Tokyo today. The deficit was smaller than the 685.4 billion yen median forecast of 27 economists in a Bloomberg survey. Comparable data go back to 1985.
The yen’s slide and increased demand for foreign energy due to nuclear plants closures are causing imports to outstrip exports, dragging on an economy that is forecast to contract after the government lifts a sales tax in April. A surplus in overseas investment income is staving off the risk of a sustained deficit that could undermine investor confidence in a nation with the world’s largest debt burden.
“A surge in domestic demand ahead of the sales-tax hike is adding to the deficit, a trend that is expected to continue through March,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
More
Japan Triple Selloff Flagged by GPIF Adviser Turned CEO
Feb 10,
2014 3:00 AM GMT
Investors will dump Japan’s bonds, stocks and currency should the government
fail to regain control of its finances, said Makoto Utsumi, who heads the
nation’s second-biggest ratings firm and helped shape its pension fund. “The triple selling of Japanese government bonds, stocks and the yen is as scary as looking down a cliff,” Utsumi, the Chief Executive Officer of Japan Credit Rating Agency Ltd., said in a Feb. 3 interview in Tokyo. “Japan needs to show its commitment to fiscal consolidation and skirt a hard landing.”
The 79-year-old, who was the top finance ministry official on the yen until 1991 and a member of advisory panel on the 2006 establishment of the Government Pension Investment Fund, said markets may face a “nightmare” unless the government shows commitment to reining in the world’s heaviest debt burden. The nation must go ahead with the second stage of its plan to double the sales tax to 10 percent and improve its finances to avoid hedge funds dumping Japanese assets, he said.
More
PBOC Signals Money-Market Volatility as China Seeks to Tame Debt
Feb 9, 2014 4:01 PM GMT
China’s central bank signaled that volatility in money-market interest rates will persist and borrowing costs will rise,
underscoring the risk of defaults that could weigh on confidence and drag down
growth. “When the valve of liquidity starts to tame and curb excessive credit expansion, money-market rates, or the cost of liquidity, will reflect that,” the People’s Bank of China said in Feb. 8 report. “The market needs to tolerate reasonable rate changes so that rates can be effective in allocating resources and modifying the behavior of market players.”
The near-default of a shadow banking product last month and two cash crunches last year highlight the challenge for policy makers pursuing twin goals of deregulating interest rates and reining in an unprecedented credit boom. Higher and more volatile interbank borrowing costs may squeeze speculative and wasteful lending even as it leaves some banks and debt providers with funding difficulties.
More
We end for the day
with Europe and dying Ukraine. When spring arrives will the pro-west part of
the population start the great trek west? Did the brave Swiss voters, just jump
start the process of ending the EUSSR? There’s that 30cwt tenor bell tolling
again.
Ukraine Controls Halt Hryvnia Slide as Crisis Roils Economy
Feb 8, 2014 12:50 PM GMT
Ukraine’s central bank reversed the hryvnia’s slide with capital controls,
giving authorities a reprieve as they struggle with a deepening economic crisis
as a political stalemate stretching into its third month. Limits on foreign-currency transactions boosted the hryvnia the most in more than four years yesterday. The Natsionalnyi Bank Ukrainy in Kiev said the measures will be temporary. Fitch Ratings downgraded the country’s foreign-currency debt to below Greece, citing a worsening financing outlook, while Ukraine’s reserves dropped to the lowest level since May 2006.
Ukrainian authorities are grappling to stabilize the economy, rocked by a political crisis that has crippled the country’s ability to raise funds. President Viktor Yanukovych traveled for the start of the Winter Olympics to Russia, which has halted payments of a $15 billion bailout after protests in Kiev and around the nation led to the cabinet’s collapse.
“The decline in reserves and risk of further capital outflows underline our view that the hryvnia is likely to weaken significantly further,” Andrew Matheny, an analyst at Goldman Sachs Group Inc. (GS), wrote in an e-mailed report yesterday. Capital controls may not ease pressure on the currency and risk leading to the emergence of a “parallel market,” he said.
More
Eurozone banks face £42bn 'capital black hole’
Government adviser Davide Serra says this year’s stress tests by European authorities are likely to find fresh problems in the eurozone banks.
Eurozone banks are facing a new capital
black hole of as much as €50bn (£42bn), according to one of the UK’s most
respected financial analysts.
Davide Serra, the chief executive
of Algebris, who advises the Government on banking, said that this year’s
stress tests by the European Banking Authority and the European Central Bank
were likely to find fresh problems in the eurozone banks.
He said that Germany had one of
“the worst banking systems in the world” and that three or four regional
Landesbanken were likely to be wound up. He also said banks in Portugal and
Greece were likely to need more capital.
“The country where I expect bad
news is the country which has not been scrutinised and has been deemed to be
the strongest,” Serra said.
----- “I expect at least three or
four [regional] Landesbanken to be put in run-off mode. The German regulator,
BaFin, is one of the weakest. It has always been lobbied by local politicians.”
Serra, who was famously
photographed last year walking to a meeting in Downing Street clutching a sheaf
of papers on the future of the Royal Bank of Scotland, said the stress tests
would finally allow the German authorities to “come clean” on their banking
system.
With combined assets of a
trillion euros, the banks account for 12pc of the country’s total banking
assets, and 3pc of Europe’s as measured by the ECB.
----Mr Serra said although
previous stress tests had failed to pick up significant problems at banks such
as Dexia and Bank of Ireland (which both needed bail-outs after passing the
test), the ECB had learned its lesson.
More
Switzerland votes to re-introduce curbs on immigration
Euro-sceptic parties hail a blow for 'people power' as Swiss vote to scrap deal allowing EU workers in
7:13PM GMT 09 Feb 2014
Switzerland voted yesterday to
reimpose curbs on immigration from the European Union, in a referendum that is
likely to cause anger in Brussels.
The nation of eight million voted
by a 50.3 majority in favour of a “Stop Mass Immigration” proposal pushed by
the right-wing Swiss People’s Party (SVP). The decision means the government
will have to renegotiate a deal struck with Brussels seven years ago that gave
most EU citizens free access to the Swiss labour market.
The SVP had said that the 80,000
EU citizens who were now coming in every year was roughly ten times the initial
predictions back in 2007, and that it had overburned the education and health
systems. Public transport was also struggling to cope, as was the housing
market.
Switzerland’s seven-member
multiparty government, the Federal Council, in which the SVP has one cabinet
post, had opposed the reintroduction of curbs, saying it could hit the economy
and undermine the country’s relationship with the EU.
But under Switzerland’s highly
devolved system of rule, where most key decisions are taken by popular
referendum, the government has no choice but to respect the result.
More
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
At the Comex
silver depositories Friday
final figures were: Registered 50.73 Moz, Eligible 131.02 Moz, Total 181.75 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, Uncle Sam seems to be changing his stance in
East Asia. But exactly what message is US General Carlisle, head of US air
forces in the Pacific, trying to send to China and Japan. To me, an amateur
observer in far away, safe if wet, London, it seems to be very close to we won’t
back Japan over the uninhabited Diaoyu Islands, but we draw the line in the
South China Sea.
If so, this will be a big shock to Japan, and a
very welcome development to China, who actually hold the high ground on the
issue via the Cairo and Potsdam declarations of November 1943 and July 1945.
But did General Carlisle really intend to send that message, and if so why the
change in US policy in such an undiplomatic way? A snub to Abe in Japan. To me, that change if it really is that
change, is a very welcome development, greatly reducing the likelihood of China
overreaching itself in the Diaoyu Islands, while putting China on strict notice
that the South China Sea must be settled by negotiation by all of the
interested nations. A strong signal of support to The Philippines, Vietnam, and
Malaysia. If General “Hawk” Carlisle misspoke, or way overstepped his brief, the
case of General MacArthur comes to mind.
"General MacArthur had been fired
"so that there would be no doubt or confusion as to the real purpose and
aim of our policy."
President Harry Truman. April 1951.
U.S. General Tells Japan, Philippines to Cool China Rhetoric
Feb 10, 2014 5:56 AM GMT
Comments by the leaders of Japan and the Philippines
drawing parallels between China’s growing assertiveness in the region and events in
pre-war Europe
are “not helpful,” said the commander of U.S. air forces in the Pacific. “The rise of Germany and what occurred between the U.K. in particular and Germany, and what happened in Europe, I don’t draw that comparison at all to what’s going on today” in the Asia-Pacific, General Herbert “Hawk” Carlisle, 58, said in an interview yesterday in Singapore. “Some of the things, in particular that have been done by Japan, they need to think hard about what is provocative to other nations.”
Carlisle urged all countries involved in territorial disputes with China in both the East and South China Seas to try and defuse tensions. He said any move by China to extend an air-defense identification zone south, where it has disputes over oil-rich waters with the Philippines, Vietnam and Malaysia, would be “very provocative”.
The recent comments by Japanese Prime Minister Shinzo Abe and Philippine President Benigno Aquino -- two U.S. allies -- have escalated tensions at a time when China is pushing its territorial claims in both the East and South China Seas, and as President Xi Jinping expands the reach of his country’s navy. Both sought to cast China’s actions against the historical perspective of Germany’s ascension in the first half of the 20th century.
“The de-escalation of tensions has got to be a multilateral approach and it’s not just one country that needs to de-escalate,” said General Carlisle, a former fighter squadron commander who is responsible for air force operations for more than half the globe, with oversight of 45,000 personnel. “All of them do. The risk from miscalculation is high. It’s greater than it should be.”
Abe said in Switzerland late last month that Germany and the U.K. went to war despite strong economic ties, and warned Japan and China must avoid a similar fate. In an interview with the New York Times published Feb. 5, Aquino called on nations to support the Philippines in defending its territory in the South China Sea, drawing a parallel with the West’s failure to back Czechoslovakia against Adolf Hitler’s demands for the Sudetenland in 1938.
China and Japan haven’t held a summit since Abe took office in December 2012.
----Any attempt by China to replicate its air zone in the South China Sea would be a “very provocative act,” said Carlisle, who has more than 3,600 flying hours in a variety of aircraft and was promoted to the rank of general in August 2012, according to his official Air Force profile.
The U.S. opposes any such move
and “we’ve strongly, through diplomatic channels, made that known to the PRC,”
Carlisle said, referring to the People’s Republic of China.
More
"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades."
Leonard Read
The monthly Coppock Indicators finished January.
DJIA: +202 Down. NASDAQ: +330 Up. SP500: +249 Up. The new Fed bubble continues, but seems to be running out
of momentum. Does the Final Fed Bubble end in an emerging market crash?
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