Baltic Dry Index. 1164 +04
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.
All hail the Great Disconnect! Don’t worry, be happy. All
news is good news in our new lawless age. What could possibly go wrong? Below, compare
and contrast Wall Street with the reality in the rest of the world. If the
Ukraine defaults as it splits apart, will Russia really take the hit to its
economy by rolling over quietly, and continuing to supply gas to Europe via the
Ukraine?
There can be few
fields of human endeavour in which history counts for so little as in the world
of finance. Past experience, to the extent that it is part of memory at all, is
dismissed as the primitive refuge of those who do not have the insight to
appreciate the incredible wonders of the present.
John Kenneth Galbraith.
Feb. 20, 2014, 4:39 p.m. EST
Stocks close higher on Markit PMI, deal boost
NEW YORK (MarketWatch) — U.S.
stocks finished with solid gains on Thursday after a choppy start to the
session, shaking off losses that came amid downbeat reports from the
Philadelphia Federal Reserve, China and Europe.
Traders found encouragement in a
gauge of U.S. manufacturing jumping to its highest level in almost four years,
as well as in more M&A activity, this time involving Facebook. In addition,
strategists said the market’s five-year bull run isn’t ready to end yet.
----“Panic if you must over
discussion of a shift in interest rates or use WalMart’s earnings as a
barometer for consumer health if you choose,” said Andrew Wilkinson, chief
market analyst at Interactive Brokers, in emailed comments on Thursday. There
are also “changing probabilities of financial tempest in other parts of the
globe” he added.
But in the absence of such
problems overseas, “the bull is likely to charge unchecked,” Wilkinson said. He
also said: “The domestic economy continues to heal nicely and this year will
undoubtedly be better than last.”
More
Ukraine Likely to Default, Credit Rating Cut to CCC, S&P Says
Feb 21, 2014 6:08 AM GMT
Ukraine is at risk of default after a political crisis “deteriorated
substantially,” according to Standard
& Poor’s. Fighting between police and anti-government protesters have
claimed at least 77 lives this week. S&P cut Ukraine to CCC, eight levels below an investment rating, from CCC+ and kept its outlook negative, citing the increasing risk that President Victor Yanukovich’s government will fail to service its debt.
“We now believe it is likely that Ukraine will default in the absence of significantly favorable changes in circumstances, which we do not anticipate,” S&P analysts said in the statement.
More
Financial crisis threatens Russia as Ukraine spins out of control
Russia faces the choice of large losses from a default or the ever rising costs of propping up Ukraine's economy
The dramatic escalation of
Ukraine’s civil conflict and fears of Russian military intervention have sent
financial tremors across Eastern Europe, turning the region into the new
fulcrum of the emerging market crisis.
“This has suddenly gone from a
domestic Ukrainian story into a geopolitical clash,” said Lars Christensen,
from Danske Bank.
The Russian ruble has fallen to a
record low against the euro, with contagion reaching Poland, Hungary and
Romania in recent days. “The moves in Russia are very like the events during the
war in Georgia in 2008. Markets are pricing in the risk of Russian
intervention,” he said.
Any deployment of Russian troops
to stiffen the Ukrainian governmment - even if invited by President Viktor
Yanukovich - could spiral out of control, leading to an East-West stand-off not
seen since the Cold War. It might even been seen as replay of Russian
intervention in Hungary in 1956 to prevent the country slipping out of the
Soviet sphere.
German foreign minister
Frank-Walter Steinmeier called Ukraine a “powder keg” as the death toll rose to
70, while Poland’s premier Donald Tusk warned of civil war.
Russian foreign
minister Sergei Lavrov called the demonstrators fascists bent on a 1930-style
“Brown Revolution”. Moscow has accused the EU of instigating a coup d’etat by
mob violence.
----“Ukraine is on the verge of splitting into two countries. We’re looking at events that we have not seen in Europe since the break-up of Yugoslavia,” said one City economist with links to Lvov. “When you have this level of hatred and mistrust, anything can happen.”
Ukraine’s foreign reserves are
down to survival levels. Russia has so far kept the country afloat with a $3bn
loan, the first tranche of a $15bn bailout, but further payments are in doubt.
----The International Monetary Fund said in a report for the G20 summit this weekend that emerging market woes are the key risk for global recovery, warning that a trifecta of “capital outflows, higher interest rates and sharp currency depreciation” could set off a corporate debt crisis.
Societe Generale said in a new
report that emerging markets have risen from 18pc of world output to 40pc over
the past 20 years, implying that a broad upheaval in these countries today
would have “much greater ramifications for the global economy”.
The bank’s China strategist, Wei
Yao, said the Chinese authorities appear determined to halt their country’s credit
bubble regardless of the pain. “There is no other ending to China’s massive
credit misallocation than a painful burst,” he said.
More
Elsewhere, in what passes for normality in the 21st
century, a tsunami of bad news is racing towards shore, but don’t tell the
Muppets cheering Facebook and WhatsApp. 2014 is likely to be an epic year but
for all the wrong reasons. Stay long fully paid up physical gold and silver.
"When paper money systems begin to crack at the seams, the run to gold could be explosive."
Harry Browne
France is looking straight down the barrel of a deflation shock
Ambrose Evans-Pritchard Economics Last updated: February 20th, 2014
French President François
Hollande must now pay the price for kowtowing to the contraction polices of the
eurozone. His country is sliding into deflation.
French prices fell 0.6pc in
January from a month earlier, and would have fallen even further without one-off
tax rises.
Manufactured goods fell 3pc, and
clothing fell 15.4pc as retailers slashed prices to offload stock.
France's core prices have been
dropping for months, even if the core CPI index is still just positive at 0.1pc
on a year-to-year basis.
This outcome is exactly what the
Observatoire Economique predicted a year ago would happen under the eurozone's
contractionary policy structure, that is to say under a triple squeeze of
fiscal austerity, passive monetary tightening, and draconian bank deleveraging.
Surprise, surprise, the eurozone
M3 money supply has been contracting since March.
People laughed at the
Observatoire. Nobody is laughing any more. As the IMF said last night, Europe
is one external shock away from a lurch into outright deflation.
----It is no mystery where that shock might come from. The Fed and the Chinese central bank are tightening into an emerging market storm that is turning more serious by the day.
A long list of countries are
having to raise interest rates to defend their currencies, creating a further
tightening bias. Some of these countries are coming off the rails altogether.
Optimists have a touching faith
in the German locomotive that is supposed to pull the eurozone out of the
swamp, but the latest data shows that German wages fell 0.2pc in 2013. Germany
too is in wage deflation.
Which raises the question: how on
earth are France, Italy, Spain, Portugal, and Greece supposed to claw back lost
labour competitiveness against Germany by means of "internal
devaluations" if German wages are falling?
More
IMF Calls for Indian Emergency Rupee Plan in Taper Warning
Feb 21, 2014 5:52 AM GMT
India should prepare a plan
to respond to volatility in global currency markets that may come as the U.S.
Federal Reserve reduces monetary stimulus, the International Monetary Fund
staff said in a report. While India’s finances have improved since last year, a coordinated plan is needed in case capital account pressures re-emerge, the IMF said. Any plan should make rupee flexibility the key defense and include measures to raise the benchmark interest rate, impose cash curbs, open foreign-exchange swap windows and raise diesel prices, it said in an annual review of India’s economy.
“The principal risk facing India is the inward spillover from a tightening of global liquidity interacting with domestic vulnerabilities,” the IMF said in the statement. Pressures associated with India’s “still-significant external financing need” could lead to higher borrowing costs, fund outflows and “disorderly adjustments” in the exchange rate, it said.
More
China Hard Landing War-Gamed for World Economy
Feb 21, 2014 12:01 AM GMT
The U.S. economy may prove more prone to deflation than the Federal Reserve
acknowledges and that may present a reason to keep monetary policy loose,
according to a model created by Wells
Fargo Securities LLC. Deflationary pressures have been “relatively high” since January 2010 and now have a 66 percent chance of prevailing in the U.S., according to Charlotte, North Carolina-based economists John Silvia, Azhar Iqbal and Blaire Zachary. Their calculations include factors such as the personal consumption expenditures price deflator, unemployment rate and the Fed’s inflation target.
The model is “useful for policy makers, investors and consumers who can attach a probability with each more-likely scenario of future price trends: inflationary, deflationary or price stability,” the economists said in a Feb. 17 report.
They say that such a persistently higher probability can highlight a looming threat. In the 1980s, for example, the model would have pointed to the risks of higher inflation, which did mark that decade.
“The recent year’s surge in the deflationary pressure probabilities may offer a justification for the highly accommodative monetary policy,” the authors said in the report.
The Wells Fargo model is more worrying than one created by the Federal Reserve Bank of Atlanta, which is based on the market for Treasury inflation-protected securities. As of Feb. 14, that gauge said the probability of deflation was steady at zero.
More
Asia Currencies Set for Worst Week Since August on China Concern
Feb 21, 2014 5:25 AM GMT
Asian currencies headed for the worst weekly loss in six months as signs of
a deeper economic slowdown in China and the Federal
Reserve’s support for tapering asset purchases weighed on emerging
markets. South Korea’s won led the declines as a gauge of manufacturing in China, the nation’s biggest export market, fell to a seven-month low. Thailand’s baht was set for its steepest five-day drop of 2014 as anti-government protests turned deadly, while violence in Ukraine also damped sentiment. Fed policy makers backed further stimulus cuts at their January review, the minutes of the meeting showed, a program that drove capital into developing countries.
More
"As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise. The history of fiat money is little more than a register of monetary follies and inflations. Our present age merely affords another entry in this dismal register."
Hans F. Sennholz
At the Comex silver depositories Thursday final figures were: Registered 50.31
Moz, Eligible 130.12 Moz, Total 180.43 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, it’s the bankster again, gate crashed in NYC
by a reporter from the lower 99 percent.
If
all else fails, immortality can always be assured by spectacular error.
John Kenneth Galbraith.
2/18/2014
at 5:05 AM
One-Percent Jokes and Plutocrats in Drag: What I Saw When I Crashed a Wall Street Secret Society
By Kevin Roose
Recently, our nation’s financial chieftains have been feeling a little
unloved. Venture capitalists are comparing the persecution of the rich to the
plight of Jews
at Kristallnacht, Wall Street titans are saying that they’re sick
of being beaten up, and this week, a billionaire investor, Wilbur Ross, proclaimed
that “the 1 percent is being picked on for political reasons.”Ross's statement seemed particularly odd, because two years ago, I met Ross at an event that might single-handedly explain why the rest of the country still hates financial tycoons – the annual black-tie induction ceremony of a secret Wall Street fraternity called Kappa Beta Phi.
“
Good evening, Exalted High Council, former Grand Swipes, Grand Swipes-in-waiting, fellow Wall Street Kappas, Kappas from the Spring Street and Montgomery Street chapters, and worthless neophytes!”
It was January 2012, and Ross, wearing a tuxedo and purple velvet moccasins embroidered with the fraternity’s Greek letters, was standing at the dais of the St. Regis Hotel ballroom, welcoming a crowd of two hundred wealthy and famous Wall Street figures to the Kappa Beta Phi dinner. Ross, the leader (or “Grand Swipe”) of the fraternity, was preparing to invite 21 new members — “neophytes,” as the group called them — to join its exclusive ranks.
Looking up at him from an elegant dinner of rack of lamb and foie gras were many of the most famous investors in the world, including executives from nearly every too-big-to-fail bank, private equity megafirm, and major hedge fund. AIG CEO Bob Benmosche was there, as were Wall Street superlawyer Marty Lipton and Alan “Ace” Greenberg, the former chairman of Bear Stearns. And those were just the returning members. Among the neophytes were hedge fund billionaire and major Obama donor Marc Lasry and Joe Reece, a high-ranking dealmaker at Credit Suisse. [To see the full Kappa Beta Phi member list, click here.] All told, enough wealth and power was concentrated in the St. Regis that night that if you had dropped a bomb on the roof, global finance as we know it might have ceased to exist.
During his introductory remarks, Ross spoke for several minutes about the legend of Kappa Beta Phi – how it had been started in 1929 by “four C+ William and Mary students”; how its crest, depicting a “macho right hand in a proper Savile Row suit and a Turnbull and Asser shirtsleeve,” was superior to that of its namesake Phi Beta Kappa (Ross called Phi Beta Kappa’s ruffled-sleeve logo a “tacit confession of homosexuality”); and how the fraternity’s motto, “Dum vivamus edimus et biberimus,” was Latin for “While we live, we eat and drink.”
On cue, the financiers shouted out in a thundering bellow: “DUM VIVAMUS EDIMUS ET BIBERIMUS.”
I’d heard whisperings about the existence of Kappa Beta Phi, whose members included both incredibly successful financiers (New York City's Mayor Michael Bloomberg, former Goldman Sachs chairman John Whitehead, hedge-fund billionaire Paul Tudor Jones) and incredibly unsuccessful ones (Lehman Brothers CEO Dick Fuld, Bear Stearns CEO Jimmy Cayne, former New Jersey governor and MF Global flameout Jon Corzine). It was a secret fraternity, founded at the beginning of the Great Depression, that functioned as a sort of one-percenter’s Friars Club. Each year, the group’s dinner features comedy skits, musical acts in drag, and off-color jokes, and its group’s privacy mantra is “What happens at the St. Regis stays at the St. Regis.” For eight decades, it worked. No outsider in living memory had witnessed the entire proceedings firsthand.
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
Another weekend. Will Russia intervene in the Ukraine next week? Poland?
Belorus? NATO? Have a great weekend everyone.
"The lamps are going out all over Europe, we shall not
see them lit again in our life-time"
Sir
Edward Grey. Foreign Secretary 1914.
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.
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