Baltic Dry Index. 1373 -39
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
The real interest
rate is probably minus 2% in the world today. It should be in line with the per
capita income growth rate or 1%. The difference is 3%.
This environment
redistributes wealth from savers to debtors on a scale of over $2 trillion per
annum or $55 billion per day. This must be the biggest legal robbery ever in
human history. But it is always coded in arcane academic lingos spoken by
respected central bankers with impeccable CVs. All that is just packaging; it
is robbery nevertheless.
Andy Xie
It is the
end of the month and quarter. Time for the Great Vampire Squids, with a nod
from the Fed, to dress up the markets for valuation day. In the Fed’s final
bubble, QE Forever and ZIRP are deliberately targeted at pushing up US stock
prices and rewarding highly leveraged stock gambling. Eventually, the Fedster’s
believe, the gamblers will drive the US real economy to escape velocity from the
effects of the 2007-2009 crash. After 5 years of ZIRP, and trillion dollar a
year deficits, with more to deficits come to infinity and beyond, there’s
little sign that these policies accomplish much other than to steal the
rightful return due to investors and savers, and give it instead to the too big
to fail, leveraged gambling houses. The Great Nixonian Error of fiat money
lurches on towards its final end in revulsion.
We open
today with more on China’s growing bust. Below a “pretty decent guy” leaves a
big mess. Plus David Stockman takes a look a modern China and doesn’t like what
he sees.
"I think most people who have dealt with me think I am a
pretty straight sort of guy, and I am."
Phony Tony Blair. 1997. The People’s Conman.
‘Cement Shen’ Detained Spurs Scavenging as China Developer Fails
Mar 31, 2014 12:00 AM GMT
Amid the cluster of half-built brick townhouses surrounded by budding peach
groves on the outskirts of Fenghua city, south of Shanghai, workers last week
could be seen taking down metal scaffolding and hauling away steel plates. They had heard the news about “Cement Shen,” the nickname of the developer whose Zhejiang Xingrun Real Estate Co. became insolvent this month with 3.5 billion yuan ($563 million) in debt, according to an official in the eastern Chinese city of Fenghua, 120 miles (190 kilometers) from Shanghai. Authorities detained founder Shen Caixing and his son for illegal fundraising, Xu Mengting, director of the government information office, said in a March 21 interview.
“The developer owed us hundreds of thousands of yuan” for scaffolding and steel, said workers Xie and Wang, who would only give their surnames as they collected dozens of long metal plates. “We are taking these materials back for now, because there’s no work here.”
The insolvency may portend difficult times ahead for small developers. China has almost 90,000 of them nationwide, National Bureau of Statistics data show. As new-home price growth slows in China and cash-flow conditions tighten, more local builders like Xingrun will face defaults, Fitch Ratings Ltd. Hong Kong-based analyst Andy Chang wrote in a March 19 report.
China’s smaller cities have experienced a building boom. About 67 percent of housing under construction in China last year was in less-affluent cities like Fenghua, according to a Nomura Holdings Inc. report.
With Chinese characters meaning Peach Blossom Palace, the development of two-story homes, some with Tudor-style turrets, was to be sold to the wealthy of Fenghua and the nearby port city of Ningbo. The elder Shen founded Xingrun, the biggest local developer, 14 years ago and was chairman of the local Real Estate Association, according to the city government website.
Wu Xijuan, a 50-year-old property agent at Tengfei real estate agency in Fenghua, said Shen was a celebrity and seemed to be “a pretty decent guy.”
More
China’s Monumental Ponzi: Here’s How It Unravels
by David Stockman • March 28, 2014
China is the greatest
construction boom and credit bubble in recorded history. An entire nation of
1.3 billion has gone mad building, borrowing, speculating,
scheming, cheating, lying and stealing. The source of this demented
outbreak is not a flaw in Chinese culture or character—nor even the kind
of raw greed and gluttony that afflicts all peoples in the late stages
of a financial bubble.
Instead, the cause is monetary
madness with a red accent. Chairman Mao was not entirely mistaken when he
proclaimed that political power flows from the end of a gun barrel-–he
did subjugate a nation of one billion people based on that principle.
But it was Mr. Deng’s discovery that saved Mao’s
tyrannical communist party regime from the calamity of
his foolish post-revolution economic experiments.
Just in the nick of time, as
China reeled from the Great Leap Forward, the famine death of 40 million and
the mass psychosis of the Cultural Revolution, Mr. Deng learned that power
could be maintained and extended from the end of a printing press. And
that’s the heart of the so-called China economic miracle. Its not
about capitalism with a red accent, as the Wall Street and London
gamblers have been braying for nearly two decades; its a monumental case of
monetary and credit inflation that has no parallel.
At the turn of the century credit
market debt outstanding in the US was about $27 trillion, and we’ve not
been slouches attempting to borrow our way to prosperity. Total
credit market debt is now $59 trillion—-so America has been burying
itself in debt at nearly a 7% annual rate.
But move over America! As
the 21st century dawned, China had about $1 trillion of credit market debt
outstanding, but after a blistering pace of “borrow and build”
for 14 years it now carries nearly $25 trillion. But here’s the
thing: this stupendous 25X growth of debt occurred in the context of an economic
system designed and run by elderly party apparatchiks who had learned their
economics from Mao’s Little Red Book!
That means there was
no legitimate banking system in China—just giant state bureaus which
were run by party operatives and a modus operandi of parceling
out quotas for national credit growth from the top, and then water-falling
them down a vast chain of command to the counties, townships and
villages. There have never been any legitimate financial prices in
China—all interest rates and FX rates have been pegged and regulated to
the decimal point; nor has there ever been any honest accounting
either—-loans have been perpetual options to extend and pretend.
More
Exclusive: China seizes $14.5 billion assets from family, associates of ex-security chief: sources
(Reuters) - Chinese authorities have seized assets worth at least 90 billion yuan ($14.5 billion) from family members and associates of retired domestic security tsar Zhou Yongkang, who is at the centre of China's biggest corruption scandal in more than six decades, two sources said.More than 300 of Zhou's relatives, political allies, proteges and staff have also been taken into custody or questioned in the past four months, the sources, who have been briefed on the investigation, told Reuters.
The sheer size of the asset seizures and the scale of the investigations into the people around Zhou - both unreported until now - make the corruption probe unprecedented in modern China and would appear to show that President Xi Jinping is tackling graft at the highest levels.
But it may also be driven partly by political payback after Zhou angered leaders such as Xi by opposing the ouster of former high-flying politician Bo Xilai, who was jailed for life in September for corruption and abuse of power.
Zhou, 71, has been under virtual house arrest since authorities began formally investigating him late last year. He is the most senior Chinese politician to be ensnared in a corruption investigation since the Communist Party swept to power in 1949.
More
Elsewhere in
Asia it was more a case of dress down Monday. Tomorrow, Japan raises its sales
tax from 5 percent to 8 percent. The last time Japan did this the Nikkei Index
collapsed and Japan entered a lost decade.
Does history repeat?
Abe Bliss Broken as Foreigners Flee Topix in Biggest Drop
Mar 31, 2014 5:11 AM GMT
In just one quarter, the developed world’s biggest stock rally has given way
to its worst slump. Japan’s Topix index, up 51 percent last year, fell 8.9 percent this quarter through March 28, almost twice as much as the next-worst market, Hong Kong. The retreat is emboldening short sellers, whose trades made up as much as 36 percent of daily Tokyo Stock Exchange volume this month. Foreign investors sold 975 billion yen ($9.5 billion) of Japanese shares in one week in March, the most since the crash of 1987.
While equities struggled around the world in the first quarter, declines were worse in Japan, where the euphoria created by Prime Minister Shinzo Abe and the central bank’s steps to beat deflation showed signs of wearing off. An appreciating yen and concern about tomorrow’s sales-tax increase punished shares more than the rest of the world at a time when China’s slowdown, Russia’s annexation of Crimea and worry that the U.S. will raise interest rates sooner than anticipated made gains harder to come by.
More
Japan Industrial Output Unexpectedly Drops as Tax Hike Looms
Mar 31, 2014 4:03 AM GMT
Japan’s industrial production fell in February, undershooting all forecasts
by economists surveyed by Bloomberg News, as the first sales-tax increase since
1997 risks stalling recovery in the world’s third-biggest economy. Output fell 2.3 percent from the previous month, the steepest drop in eight months, the trade ministry said in Tokyo today. The median estimate of 28 economists was for a 0.3 percent gain. A separate gauge of manufacturing fell in March for a second straight month.
While the weakness partly reflected disruptions from heavy snowfall, the data showed manufacturers are bracing for a slump in demand following tomorrow’s sales-tax increase. Inventories fell for a seventh straight month, lessening the likelihood of even sharper output cuts as the higher consumption levy pushes the economy into a one-quarter contraction in April-June.
More
Back on the
other side of the Great EurAsian landmass, still mostly controlled by Russia
and China, rather than Washington or Brussels, the EUSSR continues on with its never
ending car crash. With China’s ruling elite turning on each other, there’s
great instability abroad in the EurAsian landmass.
The
bankster in his mansion,
The
taxpayer at his gate,
Draghi
made them High or lowly,
He disordered
their estate.
With
apologies to All things bright and beautiful.
A deflationary future beckons for much of Europe, but still the ECB won’t listen
The eurozone has been in paralysis a long time, first in the face of financial crisis and now the clear and present danger of deflation
Your starter for 10. When is a
deflationary threat not a deflationary threat? Answer: when you see the world
through the eyes of the European Central Bank.
For some reason, there is a
general expectation in financial markets that the ECB is about to see the light
and take some form of action against sub-1pc inflation in the eurozone when its
governing council meets next week, as indeed there was at last month’s meeting,
and the one before that. They should prepare to be disappointed.
In February, eurozone inflation
stood at 0.7pc, and even two years out, the ECB forecasts that it will still be
no higher than 1.5pc.
Admittedly, this is not
“deflation” in the accepted sense of the word, but it is well below the ECB’s
target rate of “close to 2pc”, never mind that there are some eurozone
countries that very plainly are experiencing outright deflation.
Inflation in Spain, it was
announced on Friday, is running at -0.2pc, and even “boom boom” Germany is at
0.9pc. As the International Monetary Fund has warned, it wouldn’t take much to
tip the entire region into a downward spiral in demand and prices.
----Yet hope springs eternal, and many market pundits predict otherwise. One reason is remarks this week from Jens Weidmann, the generally uber-hawkish president of the German Bundesbank. To almost universal astonishment, he said he had no particular objection to quantitative easing (QE), though when it comes to using “unconventional measures”, he would prefer negative interest rates.
For Mr Weidmann, there is a
distinction to be made between quantitative easing, which would be applied pro
rata across all eurozone countries according to share of GDP, and the already
announced promise of “outright monetary transactions” (OMTs), a commitment to
buy bonds without limit in distressed sovereigns. In Mr Weidmann’s view, the
targeted nature of OMT purchases would amount to monetary financing, and would
therefore be banned by treaties. But broadly-based QE would not.
This is odd, because only last
January Mario Draghi, president of the ECB, seemed to suggest that QE would
indeed be illegal because it could be considered monetary financing. OMT
purchases, on the other hand, were all about making monetary transmission
systems more effective, and were therefore perfectly OK.
Since, then, however, he has
cited QE as one of three options for “unconventional measures”. Confused? Not
half as much as the ECB.
All this serves to highlight the
almost impossibly obstructive constraints under which the ECB operates. It
can’t act like a proper central bank, not just because it is answerable to so
many masters – which means that any consensus will always fall short of what’s
required – but also because the eurozone is not a single economic region, but
rather a collection of individual sovereigns.
More
Staying with Germany for now, the realisation is growing that America’s Ukraine sanctions policy, will sink Germany along with Russia and the Ukraine. Sinking Germany also sinks Club Med and the EUSSR. Who gains from such an inept policy? Unsurprisingly, it’s mostly Uncle Scam.
March 28, 2014, 6:31 a.m. EDT
Ex-German chancellor warns of overreaction to Ukraine
Opinion: Schmidt mirrors German ambivalence
WASHINGTON (MarketWatch) — Former German Chancellor Helmut
Schmidt has become the latest German politician to express understanding for
Moscow’s position on Ukraine as he warned that overreaction by the West could
spur Russian President Vladimir Putin to further aggression.
The 95-year-old
Social Democrat sharply
criticized the sanctions imposed against Russian individuals as “nonsense”
and cautioned that serious economic sanctions could hurt the West, especially
Germany, as much as Russia.
He said it was a
mistake to exclude Russia from the Group of Eight leading nations just when it
was important to maintain a dialogue, but felt the G-20 would be a better forum
for resolving the issue in any case.
Schmidt’s
remarks in the weekly Die Zeit come as a new poll out this week
shows a majority of Germans accept Russia’s annexation of Crimea as a fait
accompli and believe Moscow views Ukraine as part of its zone of influence.
While a majority
polled believe the West’s response has been appropriate, fully a third consider
even the weak sanctions imposed so far as excessive.
----The Left party in Germany, which
has also criticized the Western response to Ukraine and accused the new
government in Kiev of being fascist and antisemitic, quickly seized on
Schmidt’s remarks as echoing their own.
German ambivalence regarding
Russia and Ukraine has to be an important part of any calculation about a U.S.
response, since the EU’s biggest country will steer the entire bloc in the
direction it wants to go.
Schmidt said Putin’s action in
Crimea was “fully understandable.” Yes, it violated international law and
territorial integrity, but so did Western action in Libya. Schroeder has
compared it to the war in Kosovo during his chancellorship, which he says was
also technically a violation of the U.N. charter.
The agitated reaction of the West
is dangerous, Schmidt said, because it will lead to a corresponding agitation
of Russian public opinion.
As to whether Russia might now
invade other areas of eastern Ukraine, Schmidt said: “I think it is
conceivable, but I think it is a mistake for the West to act as if it was
inevitably the next step. That could possibly result in fueling the appetite on
the Russian side.”
Schmidt had praise for the
“caution” shown in the crisis by the current chancellor, Angela Merkel. He
criticized those in the U.S. like Sen. John McCain who are calling for more
forceful intervention, reminding his German audience that “at the end of the
21st century, Russia will still be a big neighbor.”
More
"The paper standard is self-destructive."
Hans F. Sennholz
At the Comex
silver depositories Friday
final figures were: Registered 53.18 Moz, Eligible 126.50 Moz, Total 179.68 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Before we entered our new lawless age, front
running the client’s orders used to be a crime commonly called theft. Not
anymore. It’s now bread and butter business to Wall Street’s Great Vampire
Squids. It’s like taking candy from a Muppet, to update the old saying.
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
High-Speed Traders Rip Investors Off, Michael Lewis Says
Mar 31,
2014 5:01 AM GMT
The U.S. stock market is a rigged game where high-frequency traders with
advanced computers make tens of billions of dollars by jumping in front of
investors, according to author Michael Lewis, who spent the past year
researching the topic for his new book “Flash Boys.” While speed traders’ strategies, developed over the past decade with help from exchanges, are legal, “it’s just nuts” that they’re allowed, Lewis said during an interview televised yesterday on CBS Corp.’s “60 Minutes.” The tactics are too complicated for individual investors to understand, he said.
“The United States stock market, the most iconic market in global capitalism, is rigged,” Lewis, whose books “Liar’s Poker” and “The Big Short” highlighted Wall Street excesses, said during the interview. The new book comes out today. “It’s crazy that it’s legal for some people to get advance news on prices and what investors are doing,” he said.
Everyone who owns equities is victimized by the practices, in which the fastest traders figure out which stocks investors plan to buy, purchase them first and then sell them back at a higher price, said Lewis, a columnist for Bloomberg View. To show how lucrative the tactics are, Lewis said a technology firm spent $300 million to build a line that would shave three milliseconds off the time it takes to communicate between New Jersey and Chicago, then leased it out to securities companies for $10 million each.
The author’s comments follow New York Attorney General Eric Schneiderman’s decision to investigate privileges marketed to professional traders that allow them to place their computers within feet of exchanges and buy access to faster data streams. Officials at the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission have also said market rules may need to be examined.
----His latest target, high-frequency trading, comprises a diverse set of software-driven strategies that have spread from U.S. equity markets to most developed countries as computer power grew and regulators tried to break the grip of centralized exchanges. While the tactics vary, they usually employ super-fast computers to post and cancel orders at rates measured in thousandths or even millionths of a second to capture price discrepancies on more than 50 public and private venues that make up the American equities market.
High-frequency traders account for about half of share volume in the U.S., a statistic that shows their pervasiveness and hints at the obstacles faced by proposals to rein them in. Exchanges rely on HFTs for profits as well as liquidity, with electronic market makers all but eliminating the old system of human floor traders who oversaw the buying and selling of equities. While critics such as Lewis see a Wall Street plot, proponents say the new system is faster and cheaper.
More
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009.
The monthly Coppock Indicators finished February.
DJIA: +203 Up. NASDAQ: +353 Up. SP500: +255 Up.
The new Fed bubble continues, what could possibly go wrong?
