Baltic Dry Index. 1602 +03
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“It is difficult not to marvel at the imagination which was implicit in this gargantuan insanity. If there must be madness something may be said for having it on a heroic scale."
J. K.
Galbraith.
We are in
the final stage of the Great Complacency. The Fed era of QE Forever and ZIRP,
where all news was good news and all the one percent had to do to steal
everyone else’s dollar, was make leveraged bets using free money passed out by
the Fed. If the bets went wrong, the Fed meekly bailed out the Great Vampire
Squids. But the Great Complacency is shortly about to end.
Having just
kicked Russia out of the largely irrelevant G-8, the remaining G-7, in reality
the G-1 plus Uncle Scam’s stooges in the EUSSR plus Japan, must now decide to
put up deeds to match their rhetoric over sanctions against Russia, (probably
triggering Russia to take over the east and south of the Ukraine since they would
have very little left to lose,) or cringingly back down and do virtually
nothing. But with American media and politicians fervently in the war party,
doing nothing is not on the table, no matter that sanctions will crush much of
the EUSSR, while having virtually no effect on Uncle Scam. Stay long fully paid
up physical precious metals held outside of the reach of John Bull and Uncle
Scam and the world’s MF Global’s. We are in a war mongering world led by
economic idiots. Events from here are about to go terribly awry. We are about
to repeat 1914, but with nuclear weapons.
In early 1914
no one in Europe saw a European war coming. In the summer of 1914,
Germany-Austria thought any war would be localised to insignificant Serbia. In
a series of spectacular blunders, by August a world war had broken out, but not
to worry, it would all be over by Christmas. Four years later, four empires lay
in ruins, the British Empire was bankrupt and missing a generation of its young
manpower, America was dominant but unwilling to assume global leadership in
stopping murderous atheistic communism. Twenty years later World War Two was
the result and one third of the world was subjugated by Stalin and Mao. Pax
Americana began in the free world. How quickly it was dissipated under the
Great Nixonian Error of Free Money. Today we stand at one of history’s great inflection points. No one can afford to be
complacent now.
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.
J. K. Galbraith.
El-Erian: Markets should be worrying about Ukraine
March 24, 2014, 12:13 PM
Markets have been lulled to complacency by geopolitical tensions in recent
years, says to Mohamed El-Erian, who’s still typing up a storm after his
departure from Pimco.But, he says, beware of Ukraine.
In a fresh commentary posted to the Financial Times on Monday, El-Erian says markets have “brushed aside” concerns about Iran, Iraq, North Korea and Syria, to saying nothing of rising tensions in Turkey and Venezuela. With Ukraine, the market had a single day of fear over Russia’s annexation of Crimea.
----But, “in aggregate they are starting to affect a more meaningful part of the global economy,” and could prompt the U.S. and Europe to step up involvement, El-Erian says. In Ukraine he sees a couple of scenarios.
First, the worst case:
“All it would take is for
additional blatant territorial intervention by Russia to trigger comprehensive
financial and economic sanctions by the west. With Russia likely to retaliate
by disrupting the supply of energy to western Europe, the world would
be thrown into recession, along with renewed financial instability – a
situation that would certainly derail capital markets.”
Now, the more likely case:
“The situation is likely to
stabilise temporarily at a new geopolitical equilibrium, albeit a fragile one,
in which the west tolerates the annexation of Crimea and Russia’s ‘legitimate
interests’ there, while Russia pays lip service to Ukrainian territorial
integrity and supports international help for the country while deferring some
of its own claims.”
So, what do we take from all of
this? Markets may not be pricing in geopolitical risk now, but if tensions
reach a tipping point, they may rush to do so in a hurry.
More
Russia Suspended From G-8 as Leaders Warn of Sanctions
Mar 24, 2014 11:51 PM GMT
The world’s top industrial powers threatened further sanctions to deter
Russian President Vladimir Putin from taking over other parts of Ukraine
and suspended Russia
from participating in the Group of Eight. Meeting for the first time since last week’s annexation of Crimea by Russia, Group of Seven leaders said last night they won’t attend a planned G-8 meeting which was to have to been held in Sochi, site of the Winter Olympics, and will instead hold their own summit in June in Brussels
----With yesterday’s move, the G-7 -- the
U.S., Germany, the U.K., France, Italy, Canada and Japan -- reverted to its Cold War-era format, suspending what became
the G-8 in 1998 when Russia was welcomed in. The group was all smiles around a
Putin-less conference table in a photo posted on Twitter by European Commission
President Jose Barroso, who attended along with EU President Herman Van Rompuy.
More
http://www.bloomberg.com/news/2014-03-24/russia-suspended-from-g-8-as-leaders-warn-of-sanctions.html
Russia Gets Ready for Life Without Visa and MasterCard
Is
Russia ready to cut up its plastic? After Visa and MasterCard stopped
processing some Russian transactions in response to U.S. sanctions, Moscow
says it could launch a homegrown payment system that could be ready in as
little as six months, according to
German Gref, chief of the country’s largest bank, Sberbank
(SBER:RM).
Hard as it may be for Americans to imagine life without Visa (V) and MasterCard (MA), jettisoning them wouldn’t be all that difficult. Moscow has been preparing for the past few years to issue an electronic payment card that citizens could use for transactions with the government, such as tax and pension payments. Expanding that to include private purchases wouldn’t be hard, says Avivah Litan, an analyst at Gartner Research (IT): “If the banks are all on board, they can use the existing [card-reading] equipment in the retail stores. They’ve been thinking about it for so long, it’s just a matter of flipping the switch.”
Legislation has already been introduced in Russia’s parliament that would ban the use of payment systems based outside of the country. “The fact that our banks use infrastructure that they cannot control carries a real threat for national security,” lawmaker Vladislav Reznik said in introducing the measure on March 21.
----Getting rid of Visa and MasterCard would cause two very big problems for Russia, though. A government-issued payment card wouldn’t be accepted outside the country, so that Russians going abroad would either have to pay in cash while they travel or—more likely—try to get a card from a foreign financial institution. And Russia could essentially forget about attracting foreign visitors if merchants there could accept only Russian-issued plastic.
Despite the anti-U.S. rhetoric,
“No one wants this to explode into shutting down all the [foreign] cards in
Russia,” says David Robertson, publisher of the Nilson Report, a U.S.
card-industry newsletter.
More
Capital controls feared in Russia after $70bn flight
Investors are withdrawing money at a rapidly increasing rate amid escalating sanctions from the West
Capital flight from Russia has
spiked dramatically since President Vladimir Putin first sent troops into
Crimea and may reach $70bn (£42bn) over the first quarter of the year,
prompting fears that the country may soon have to impose capital controls to
stem the loss.
Andrei Klepach, the deputy
economy minister, admitted in Moscow that the outflows are likely to reach
$65-70bn, far higher than originally expected and a clear sign that investors
are extremely nervous of escalating sanctions.
“It is shocking,” said Bartosz
Pawlowski from BNP Paribas. “Markets have been extremely complacent, fooling themselves
that Russia is invulnerable because it has almost half a trillion in foreign
reserves. But reserves can become almost irrelevant in this sort of crisis.”
Lars Christensen from Danske Bank
said the authorities may resort to some form of financial coercion to lock down
funds in Russia. “Capital controls are a serious risk, and should not be
discounted. Whatever now happens, there has been permanent damage to the
Russian economy because investors are not going to forget this lightly.”
More
Below, yet
another red flag from wobbly China. When the wild west “blood-sucking vampire”
blows up, I suspect that the Fed’s final bubble blows up with it, and the Great
Nixonian Error of fiat money, comes to an end. We can only hope that it happens
before America’s war party and their European lackeys, take the world into a
disastrous for all worldwide war against Russia. Stay long fully paid up
physical gold and silver held outside of the larcenous reach of John Bull and
Uncle Sam.
China Banks Drained by Funds Called Vampires Seek Rules
Mar 24, 2014 11:01 PM GMT
It has been labeled a “blood-sucking vampire” by a prominent commentator on
state-run television. Executives at China’s largest banks have called for
regulators to curb its rapid expansion. The focus of this ire is Internet financing, specifically Yu’E Bao, the fund pioneered nine months ago by Alibaba Group Holding Ltd.’s online-payment affiliate Alipay. Its ease of use, involving a few taps on a smartphone, has drawn deposits from 81 million customers, more than the population of Germany, as they chase returns higher than China’s banks can offer. The total exceeded 500 billion yuan ($80 billion) as of Feb. 28, according to the official Xinhua news agency, double the amount reported by Alipay in mid-January.
At least six other technology firms, including Baidu Inc. (BIDU) and Tencent Holding Ltd. (700), have embraced Internet financing with similar products offering returns as high as 10 percent and threatening to drain more cash from China’s banking system. Bank executives, unable to stop the outflow of their cheapest source of funding because interest rates on comparable deposits are fixed by the government at 0.35 percent, are calling for more regulation, saying that lack of oversight and risks related to account security, yield volatility and liquidity management threaten China’s financial stability.
“Now it’s time to step up regulation for
the industry’s own good,” Yang Kaisheng, a former president of Industrial
& Commercial Bank of China Ltd. and now an adviser to the China Banking
Regulatory Commission, said in an interview this month at the National People’s
Congress in Beijing. “The emergence of Internet financing is inevitable in
China because it serves the grassroots better, but whoever is engaging in
financial services, no matter online or off-line, must comply with regulations.
If someone stays out of oversight for too long, the chances of it disrupting
financial stability will increase significantly.”
More
Why China's Manufacturing Sector Has Hit a Wall
More bad economic news out of
China: A key indicator released on March 24 showed that the manufacturing
sector of the world’s second-largest economy contracted for the fifth straight
month.
The HSBC and Markit purchasing
managers’ index fell to 48.1 in March, below the 48.7 expected by analysts in a
Bloomberg News survey (a number above 50 indicates growth). “The weakness
appears even more pronounced given that there is usually a seasonal rebound
after the Chinese New Year holiday,” said
Julian Evans-Pritchard, China
economist at London-based Capital Economics, in a March 24 note.
The lackluster showing of the
so-called Flash PMI (usually based on results from 85 percent to 90 percent of
companies surveyed; the final reading will be released April 1) follows weak
investment, industrial production, and export numbers in the first two months.
----China’s slowing economy may mean a more gradual implementation of the sweeping market opening, proposed at the Third Plenum, a key party meeting held last November. While some reforms may support growth (such as opening more space for private capital), others, such as pushing enterprises to deleverage and reducing excess inventories, are expected to have a dampening effect on GDP.
“The brief honeymoon period in which China’s leadership could deliver both structural reforms and accelerating growth is now over,” warned Andrew Batson, China research director at Beijing-based GK Dragonomics, in a January note.
More
http://www.businessweek.com/articles/2014-03-24/why-chinas-manufacturing-sector-has-hit-a-wall#r=rss
Short China Stocks to Win From Rising Defaults, Maglan Says
Mar 25, 2014 3:06 AM GMT
Investors should avoid China’s bond market after the
first onshore default because state intervention and debt restructuring could
prompt losses, according to New York-based hedge fund Maglan Capital LP. The best way to make money from distressed companies in the world’s second-largest economy is by betting against listed stocks, according to David Tawil, co-founder of Maglan Capital, which invests in companies struggling to repay their debt.
“In China, government involvement is much more pervasive, especially in industries like banking and real estate,” Tawil said in a March 21 phone interview. “The only way to play the distressed cycle is shorting equities. The problem in fixed income is, I don’t know if the bonds are going to drop, and even if they do drop, the government may come in and rescue them.”
China had its first onshore default earlier this month when solar-cell maker Shanghai Chaori Solar Science & Technology Co. missed part of a bond-coupon payment due March 7. Closely held Zhejiang Xingrun Real Estate Co. collapsed on March 17 after government officials familiar with the matter said it didn’t have enough cash to repay 3.5 billion yuan ($565 million) of debt. While China Credit Trust Co. was bailed out in January, Premier Li Keqiang said this month defaults may be unavoidable in some cases.
More
We end for
the day with the next Ukraine? Is China preparing to reunify Taiwan? Time for
another American Coup in the east? If so, hopefully they won’t botch it and let
it get taken over by fascists and far right nationalist nutcases. Is America
and the EUSSR ready for the big one, war against Russia and China?
For Taiwan's Embattled President, Awkward Similarities With Ukraine's Ousted Leader
After the events
in Ukraine over the past month, the news from Taiwan feels eerily
familiar. The turmoil takes place in a small country that has spent years
living uncomfortably in the shadow of a major power—one with ambitions to
recover territory lost during a humiliating period of weakness. The small
country has a weak economy, and the government decides to push through a
controversial deal to tie the small country’s prospects closer to its powerful
neighbor. That move sparks outrage against the unpopular president, who has
already faced criticism after the jailing of a popular opposition leader on
corruption charges. The protests grow, turning violent as the embattled
president orders security forces to break up the demonstrations.
Taiwanese President Ma Ying-jeou is not former Ukrainian leader Viktor Yanukovych—Ma, for one, doesn’t have an opulent home with seven limos, a private zoo, and a life-size galleon on a man-made lake—but as political unrest grows in Taiwan, the similarities between the two are striking. Just as Russians considered Crimea to be territory unjustly separated from Mother Russia, the Chinese government has insisted since the days of Mao Zedong that Taiwan is an inseparable part of the People’s Republic.
Both the Ukrainian and Taiwanese economies have suffered from disappointing growth, especially compared with more dynamic neighbors, and just as Yanukovych wanted to cement closer ties with Russia, Ma has been promoting a deal to liberalize trade and services with China. Yanukovych jailed former Premier Yulia Tymoshenko for a seven-year term, while Ma’s predecessor, former President Chen Shui-bian, is serving a 20-year sentence after being convicted on corruption charges in 2009.
Now the Taiwanese leader is quelling a student-led revolt against his attempt to ram through the legislature the services trade pact signed with the mainland last year. While lawmakers have dragged their feet on approving the agreement, Ma has called it a vital step in his efforts to revitalize the Taiwanese economy, which last year grew 2.95 percent, down from 3.85 percent in 2012. The deal would open banking, brokerages, e-commerce, and other sectors of the Taiwanese economy to investment from the mainland.
Critics say Ma’s government has reneged
on a promise to do a line-by-line review of the agreement. The president isn’t
compromising, and in the early hours of Monday riot police fired water cannons
at protesters to clear them from the building in Taipei that is the
headquarters for the cabinet. Police arrested about 60 people, Bloomberg
News reports, and a total of 110 people—demonstrators and police
officers—were injured. But the students still are occupying the legislature.
More
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
At the Comex
silver depositories Monday
final figures were: Registered 53.23 Moz, Eligible 129.34 Moz, Total 182.57 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
As the west conditions the world for a coming war
with Russia over America’s botched Coup in Kiev, we present below the latest
mishap in our current world of dumbed down modern commercial aviation. I can
only hope that when the bombing starts in earnest, military pilots on all sides
are better trained at finding the right destination.
If
all else fails, immortality can always be assured by spectacular error.
J. K.
Galbraith.
Whoops
Lost in Branson: A Southwest Flight Causes Big Confusion at the Wrong Airport
A
Southwest Airlines (LUV) crew that landed
at the wrong airport in Branson, Mo., contacted a tower across town after
the plane landed, curious to know where they were. “I assume I’m not at your
airport?” a pilot on Flight 4013 asked
a controller in the tower at Branson Airport, which is about seven
miles southeast of the M. Graham Clark Downtown Airport, at which the plane
found itself on Jan. 12.
“Southwest 4013, um, have you landed?” the tower controller replied, according to a recording the Federal Aviation Administration released today. The controller then called a fellow FAA controller in Springfield—the regional radar approach facility that monitors air traffic in the region above 2,000 feet—to clarify what had happened to the flight cleared to land in Branson. Springfield is about 45 miles north of Branson.
“Did you watch Southwest, uh, land?” the Branson controller asked his counterpart, in a conversation that’s sure to induce cringes among professional pilots.
“Yeah.”
“O.K.”
“Why?”
“Did you see him come here?”
“Say that again?”
“He said he landed at the wrong airport.”
“Are you kidding?”
“No, I’m not.”
“No, he dropped off (radar) about over Point Lookout.” (This is an unincorporated community near Branson in Taney County.)
“I think that’s where he landed. I’ll call you back.”
Passengers aboard the Boeing 737 said that pilots had to brake more severely than usual because of the airport’s 3,738-foot runway. (The main Branson airport has a strip that is 7,140 feet long.) No one was injured in the incident; the passengers were bused to the proper airport and the plane continued on to Dallas a day later. The National Transportation Safety Board and FAA are investigating the incident, and Southwest has placed both the captain and first officer on paid leave pending the findings.
More
Oakley R. Bramble
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?
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