Baltic Dry Index. 1273 -43
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
All treaties between great states cease
to be binding when they come in conflict with the struggle for existence.
President Putin, with apologies to Count Otto von Bismarck.
We note with
rising alarm that the Baltic Dry Index is plunging again. Its post Chinese New
Year bounce has given back over 50 percent of its recovery. In our Alice in
Wonderland world of QE Forever and ZIRP, buy more, nothing to be concerned
about here.
Today we
return to the wealth destroying euro effect in Euroland. One German sized euro
does not in fact fit all, despite what Europe’s unelected lying bureaucrats and
bent politicians parrot repeatedly.
Below the
state of the downwardly mobile, modern continental European. And this is before
Chancellor Merkel commits Germany to national suicide, imposing sanctions on
trade partner Russia, following America’s illegal botched Coup in Kiev. Madness
now drives the west’s policies. For now at least, Russia’s are still sane.
Whoever speaks of Europe is wrong: it is
a geographical expression.
Count Otto von Bismarck.
ECBs deflation paralysis drives Italy, France and Spain into debt traps
Frankfurt could force down the euro at any time by signalling a determination to do something about its predicament. It has chosen not to do so
The European Central Bank has let
it happen. Deflation has been running at an annual rate of -1.5pc in the
eurozone over the past five months, when adjusted for austerity taxes.
Prices have been falling at a
pace of 6.5pc in Greece, 5.6pc in Italy, 4.7pc in Spain, 4pc in Portugal, 3pc
in Slovenia and nearly 2pc in Holland since September, based on my rough
calculations (annualised) of Eurostat monthly data.
The rise of the euro against the
dollar, yen, yuan and the currencies of Brazil, Turkey and developing Asia,
account for some of this imported deflation. Euroland's trade-weighted index
has risen 6pc in a year.
But that is no excuse. It is the
direct consequence of the ECB's own monetary policy. Frankfurt could force down
the euro at any time by signalling a determination to do something about its
predicament. It has chosen not to do so, hoping that a few dovish words spoken
without conviction will somehow turn the global tide.
It is hard to judge at what point
deflation becomes embedded in the system. Factory gate prices have been
slipping since mid-2012. The pace quickened to -1.7pc in February, the steepest
decline since the Lehman crisis. But this time it is not the one-off effect of
a financial crash. It is chronic, and more insidious.
----Laurence Boone and Ruben Segura-Cayuela, from Bank of America, say their "inflation surprise" index keeps ratcheting lower as one shock after another hits the eurozone, while their gauge of "deflation vulnerability" has been flashing red for most EMU countries.
The effect is deeply corrosive
even if the region never crosses the line into technical deflation.
"Lowflation" near 0.5pc can play havoc with debt trajectories if it
goes on for long, ultimately throwing Europe back into a debt crisis. "The
biggest threat to public debt dynamics is weaker-than-expected inflation.
Merely lower than expected inflation, not even deflation, would lead to a significant
deterioration in countries’ public finances," they said.
The bank said lingering
"lowflation" would cause debt ratios to surge by 2018, rising 10
percentage points in France to 105pc of GDP, 15 points in Italy to 148pc and 24
points to 118pc in Spain.
These countries face a Sisyphean
Task. Whatever they achieve through austerity is overwhelmed by the greater
power of debt-deflation. The same "denominator effect" - a debt
burden rising faster than nominal GDP - would engulf the private sector as
well, still the Achilles Heel for Spain, Portugal and Ireland.
More
In Asia,
China took steps to control its economic wobble. But it’s all likely too little
too late. Expensive unused railways from nowhere to nowhere, are merely the
sophisticated equivalent of digging holes, only to fill them in and then
repeat.
"My daughter asked me when she came home
from school, “What’s the financial crisis?” and I said, it’s something that
happens every five to seven years."
Jamie Dimon, US CEO of
JPMorgan Chase
China Outlines Measures to Support Growth as Goal Recedes
Apr 3, 2014 4:16 AM GMT
China outlined a package of measures including railway spending and tax
relief to support the economy and create jobs after a slowdown endangered
Premier Li Keqiang’s target of 7.5 percent growth this year. The government will sell 150 billion yuan ($24 billion) of bonds this year to help build railways mainly in the less-developed central and western regions, the State Council said in a statement last night after a meeting led by Li. Authorities will also create a development fund of 200 billion yuan to 300 billion yuan a year to increase sources of rail financing.
The measures expand on the cabinet’s plans to speed up construction projects after slowdowns in manufacturing, retail sales and investment pointed to unexpectedly weak growth. The world’s second-largest economy probably grew 7.4 percent last quarter from a year earlier, according to analysts surveyed by Bloomberg News in March, down from a previous median estimate of 7.6 percent.
“It’s a mini-stimulus package designed to stabilize growth,” said Xu Gao, chief economist with Everbright Securities Co. in Beijing. “As the growth rate is decelerating to the lower end of a reasonable range, Premier Li is trying to do something to get growth back on track.”
More
China Leverage Seen Rising Through 2016
Apr 3, 2014 2:55 AM GMT
China’s debt is poised to keep expanding faster than the economy through at
least 2016, testing the limits of a credit-driven growth model that’s already
exceeded the imbalances in Japan before its lost decade. The combined ratio of government, corporate and household debt to gross domestic product is set to climb to 236.5 percent in 2016 from 225 percent last year, based on median estimates in a Bloomberg News survey of economists and analysts. Asked when the ratio will peak over the next decade, the largest proportion of respondents said 2018 or 2019.
The responses reflect skepticism that the Communist Party is prepared to allow the long-term deleveraging flagged by the central bank, as leaders focus on preventing an economic slowdown and sustaining employment. China’s debt-to-GDP ratio is already higher than India’s, Brazil’s and Russia’s and JPMorgan Chase & Co. says it’s surpassed the level in Japan that preceded that nation’s financial crisis.
“China needs to watch out -- it has pushed the envelope,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong, who formerly worked at the World Bank and International Monetary Fund. “It needs to work on mitigating the risks, mitigating the excesses.”
more
In High Frequency
Trading scandal news, the US stock market rigging scandal continues to grow
like Topsy. If the laws are correctly applied, all the HFT players should be
forced to disgorge the trillions they acquired as a result of sophisticated,
but plain old fashioned theft. But is modern America still a land that upholds
rule of law? In the coming weeks and months we will eventually find out. But in
good old Yankee Liebor fashion, shouldn’t the UK and the EU’s regulators be
jumping in, piling on the pressure, in this new market rigging scandal? Why miss
out on the billions of potential free money, ala BP, in what passes for 21st
century capitalism. The logical ending of the Great Nixonian Error of fiat
money and market rigging.
It’s morally wrong to let a sucker keep his money.
Ebenezer Squid, with apologies to W. C. Fields.
Lewis Likens Einhorn to ‘Dumb Tourist’ in Fixed Card Game
Apr 2,
2014 5:23 PM GMT
In today’s “rigged” U.S. stock market, large investors such as Greenlight
Capital Inc.’s David Einhorn are like “dumb tourists” led to a casino
where the card games are fixed, according to Michael Lewis, whose book “Flash Boys” has touched off
a national debate about high-frequency trading. “It’s very clear people are being front-run,” Lewis, whose book paints a portrait of markets rigged by insiders with advanced computers, said in a Bloomberg Television interview today with Erik Schatzker and Stephanie Ruhle.
Einhorn, whose Greenlight Capital hedge fund manages billions of dollars, didn’t initially understand what was going on, Lewis said. Einhorn’s reaction when he learned: “Oh my God. This I did not know,” Lewis said. Einhorn declined to comment on Lewis’s analogy.
More
Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis Book
Apr 2,
2014 5:00 AM GMT
Virtu Financial Inc., the high-frequency trader that announced plans last
month to sell shares, will start marketing the offering weeks later than
bankers anticipated, two people with knowledge of the matter said. Virtu won’t start marketing the initial public offering until after April 20, a process its bankers had expected to begin this week, according to the people, who asked not to be named because the decision is private.
The delay comes amid unprecedented scrutiny of high-frequency traders. “Flash Boys,” the Michael Lewis book released March 31, says high-speed traders, Wall Street brokerages and exchanges have rigged the $23 trillion U.S. stock market. New York Attorney General Eric Schneiderman is examining privileges such as enhanced data feeds marketed to high-speed firms, while the Federal Bureau of Investigation is looking into whether those traders are breaking U.S. laws by acting on nonpublic information.
Chris Concannon, the president of New York-based Virtu,
declined to comment on the IPO. The trading firm provides quotes in more than
10,000 securities and contracts on more than 210 venues in 30 countries,
according to its IPO filing. It earned money from trading on every day but one
in the last five years, according to the document
----The U.S. Commodity Futures Trading Commission has asked about Virtu’s “participation in certain incentive programs offered by exchanges or venues” from July 2011 to November 2013, Virtu said in its IPO document. Virtu said it doesn’t believe it broke the law, “but we cannot predict the outcome of the inquiry.”
The trading firm’s total revenue
last year was $664.5 million, according to the filing, an 8 percent rise over
the previous year. Net income was $182.2 million, more than double 2012’s
earnings, when it recorded a charge for an acquisition.
More
In other US 21st
century “capitalism” news, banker JP Morgan is exiting commodities. Something
about rats and ships comes to mind.
Banks are an almost irresistible attraction for that element of our society which seeks unearned money.
J. Edgar Hoover
Blythe Masters Ends 27-Year Run at JPMorgan
Apr 2, 2014 7:49 PM GMT
Blythe Masters, who rose from being a JPMorgan Chase & Co. (JPM) intern to
global head of a commodities powerhouse over 27 years, plans to exit after she
helps the bank complete the $3.5 billion sale of units she oversees. Masters, 45, “has informed us of her intention to leave the firm, take some well-deserved time off and consider future opportunities,” Chief Executive Officer Jamie Dimon, 58, and investment-banking head Daniel Pinto, 51, said today in a memo.
JPMorgan announced the sale of its physical commodities business to Mercuria Energy Group Ltd. last month amid pressure from regulators and lawmakers concerned that banks handling raw materials and energy could manipulate prices or endanger the financial system. That raised the question of whether Masters would join Mercuria, a decade old Geneva-based trader, or remain at JPMorgan to manage a diminished business. She chose neither.
----Masters rose to prominence in the 1990s after helping develop credit-default swaps, the derivatives that enable investors to hedge risks on bonds. She ran several credit desks and became the investment bank’s chief financial officer before being named to run the commodities business in late 2006.
JPMorgan’s commodities trading
surged with the 2008 acquisition of Bear Stearns Cos., which included an
energy-trading platform. To compete with New York-based Goldman Sachs Group
Inc. and Morgan Stanley, JPMorgan bought UBS AG’s global agriculture and
Canadian commodities units in 2009, and part of commodities trader RBS Sempra
in 2010.
----She returned to the spotlight in July of last year, when JPMorgan agreed to pay $410 million to settle U.S. Federal Energy Regulatory Commission allegations that units she oversaw manipulated power markets, enriching itself at the expense of California and Midwest residents from 2010 to 2012.
The settlement released JPMorgan,
all subsidiaries and employees, including Masters, from any future enforcement
actions by FERC in the case. The bidding strategies at issue were developed by
a Houston-based unit run by Francis Dunleavy, who was one of eight people who
reported directly to Masters.
Spurred by complaints from industrial customers, U.S. lawmakers held hearings in July on whether banks abused their ownership of raw materials to inflate prices. The lawmakers warned that a catastrophe involving a bank-owned supertanker or power plant could jeopardize a lender’s health and leave taxpayers on the hook for a bailout.
That same month, the Federal Reserve said it was reviewing a decade-old decision that allowed lenders including JPMorgan and Citigroup Inc. into the business because physical commodities were “complementary” to banking.
More
“The world is a place that’s gone from being flat to round to crooked.”
Mad Magazine.
At the Comex
silver depositories Wednesday
final figures were: Registered 53.43 Moz, Eligible 125.63 Moz, Total 179.06 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Not our everyday ordinary crooks today. Today a glimpse inside the
people’s paradise of the murderous world of North Korean communism, successor Godless
socialist state, to Hitler and Stalin. North Korea, the human roach motel. A
stain on the conscience of the world.
North Korean intelligence official tells of aborted coups and assassination attempts
One of only a handful of North Korean intelligence officials ever to have escaped the country paints a dark portrait of plotting and factions in Pyongyang
Andrew Salmon in Seoul 6:00PM BST
02 Apr 2014
A former North Korean
intelligence officer who defected to the West has given an extraordinary
account of the paranoia and turmoil within the secretive regime. The official described how assassination attempts on Kim Jong-il, the country's leader until three years ago, drove the country's feared internal security apparatus to take elaborate measures against suspected plots, real or imagined - including an attempt by a rogue army unit to launch missiles against Pyongyang.
The official, who asked to be named only as "Mr K", said he had personal knowledge of two assassination attempts on Kim Jong-il, who ruled North Korea from 1994 until his death in December 2011.
In one attempt, a lone gunman with an automatic weapon attempted to shoot him, but was captured before firing. In another, a would-be assassin driving a 20-ton lorry rammed his motorcade but failed to kill Kim Jong-il, whose car was in a convoy of identical limousines and was not among those damaged.
In an extraordinarily rare behind-closed-doors breifing, the official also detailed two attempted coups against the regime, following uprisings in the Korean People's Army, especially among the officers who had been trained in the former Soviet Union.
He described how North Korean
officers who had graduated from Moscow's Frunze military academy had been
persuaded by Russian officials to feed intelligence back to the Kremlin.
In one plot, a group of officers
hoping to provoke a Russian intervention against the regime planned to stage a
bomb attack on the Russian consulate in the North Korean city of Chongjin. In
another, a north eastern army unit planned a missile strike on key targets in
Pyongyang. Both plots, said Mr K, were discovered before they took place.
Mr K's claims cannot be directly
verified, but much of what he said is supported by other sources. He requested
that the directorate that he worked for and his current activities in South
Korea remain secret.
Both accounts appear to be
supported by circumstantial evidence. North Korea watchers have noted that in
1994, a group of officers who had studied in Russia were rounded up and
imprisoned, in what became known as the "Frunze Affair".
Then in 1997, for reasons that
were at the time unexplained, the regime sent troops into the headquarters of
the army's Sixth Corps, prompting firefights and arrests. The corps was
subsequently disbanded.
Describing the country's internal
security system, Mr K - who fled the country in 2005 - said that even the most
senior cadres and army generals were routinely monitored, often by agents
posing as their chauffeurs, and their activities reported to the Supreme Leader
in weekly bulletins.
He also said the regime's
crackdown on private markets had led to a flurry of dissident graffiti and
pamphlets, with messages such as "How are we supposed to survive?"
scrawled on walls.
So suspicious were Pyongyang
officials that when a circus in the North Korean capital burned down a day
before Kim Jong-il's birthday, it was believed to be an anti-regime protest, he
said.
The country's notorious gulags,
meanwhile, are run by a unit with the chilling cover name of "Farm
Guidance Directorate" - appropriately enough, said Mr K, because the
prison-camp inmates are "less than human".
In the "total control"
camps, where political criminals are sent, "once you check in, you do not
check out," he said. "Even dead bodies do not leave the total control
zones."
More
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
The monthly Coppock Indicators finished March
DJIA: +197 Down. NASDAQ: +357 Up. SP500: +254 Down.
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