Baltic Dry Index. 949 -12
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The
U.S. government has a technology, called a printing press (or today, its
electronic equivalent), that allows
it to produce as many U.S. dollars as it wishes at no cost."
Dr. B. S. Bernanke. November 2002.
Yes it’s yet
another day when we all await the divinations of high priests of Mammon in Washington,
in their ever more desperate attempt at centrally planning the final bubble in
the Great Nixonian Error of fiat money. In this latest iteration of mankind’s
folly, trillions of new unrepayable global debt has been run up, to try to keep
the illusion of recovery from the colossal crash of the casino gambling US
dollar reserve financial system 2008-2009. We will all now get rich by washing
each other’s cars and laundry, and betting on the new tulips, Facebook and
twitter. In this final blow-off phase of the Fed’s final bubble, with free
money still flooding out of the Fed but supposedly coming to an end, the Great
Vampire Squids will undergo a feeding frenzy of mega takeovers, dodgy refinancing’s,
and the ultimate in Ponzi schemes. The
Bernie Madoff prize in ultimate dishonesty goes to the Fedster’s of 1987-2014.
Below,
MarketWatch’s take of today’s supposed non-event. “Move along now, nothing to
see here.” Keep buying stocks to fund the High Frequency Trading thieves.
"We’ve
never had a decline in house prices on a nationwide basis. So, what I think
what is more likely is that house prices will slow, maybe stabilize, might slow
consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full
employment path, though."
Dr. B. S. Bernanke. 2005.
April 29, 2014, 2:47 p.m. EDT
No fireworks expected at Fed meeting
Incremental taper seen continuing
WASHINGTON (MarketWatch) — After
intense market gyrations in the wake of their mid-March meeting, Federal
Reserve officials are aiming for peace and quiet at the end of their two-day
policy meeting this week.
“We expect no fireworks at the
April gathering,” said Michelle Girard, chief U.S. economist at RBS, in a
research note.
It
would be very surprising if there were any material changes in the policy
statement,” agreed Lou Crandall, chief economist at Wrightson ICAP.
The Fed statement will be released at 2 p.m. Eastern. There will not be a
press conference or new economic forecasts to “stir the pot,” said Vincent
Reinhart, chief U.S. economist at Morgan Stanley.
At the meeting, the Fed is widely seen deciding to continue to taper its
bond purchase program by $10 billion, bringing the purchase pace down to $45
billion per month, making this the fourth meeting in a row with a $10 billion
reduction in bond purchases.
The
central bank’s policy statement could be a little more upbeat on the margin, as
recent economic data has supported the central bank’s conclusion that economic
growth was only temporarily held down in the first quarter by winter storms.
In March, the Fed statement said that the economy slowed in March “in
part” because of winter storms.
The first quarter gross domestic product report will be released early
Wednesday well before the end of the Fed’s meeting at 2 p.m. Eastern and is
widely expected to be dismal.
But economists say that most recent economic data has confirmed a strong bounce back
in the second quarter.
Fed officials believe the economy is on track to slowly improve in the
second half of the year and could be strong enough for the central bank to
begin to raise short-term interest rates in the second half of 2015.
More
But, tapering
and higher future interest rates, make for very nervous one percenters. Greater
fool markets rely on their always being that greater fool to sell out too. With the Fed allegedly calling
time on greater fools with the prospects of higher interest rates and an end to
QE and ZIRP, (I’ll believe it once it happens, since an end to both triggers
the crash they were started to prevent,) we have just about run out of Greater
Fools. We are very close to our Bernie Madoff Moment.
Below, the
shine falls off today’s tulips.
"With
respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions
and individuals who have considerable
incentive to understand them and to use them properly."
Dr. B. S. Bernanke. November 2005.
April 29, 2014, 6:15 p.m. EDT
Twitter, eBay shares fall after hours
SAN FRANCISCO (MarketWatch) —
Twitter Inc. shares fell in the extended session Tuesday after the company
reported fewer than expected active monthly users. EBay Inc. and Express Scripts Holding Co. shares also fell in a
generally downbeat after-hours session.
Twitter
TWTR -11.22% shares
fell 10.4% to $38.18 on very heavy volume after the microblogging platform said
it averaged 255 million monthly users at the end of March, when
analysts were looking for an average of 257 million. Twitter shares had the
highest volume of any stock after hours with more than 8.6 million shares
exchanging hands.
The company reported adjusted results of break-even for the quarter on
revenue of $250.5 million. Analysts surveyed by FactSet estimated a loss of 3
cents a share on revenue of $241.5 million. Shares of Twitter closed up 4.6% at
$42.62 during the regular session Tuesday.
More
April 29, 2014, 9:49 a.m. EDT
Why teens are rebelling against Facebook
Twitter has fared better at holding on to younger users
Facebook
FB -0.89%
may be the biggest social network on the planet with 1 billion-plus users, but
it’s not beating Twitter in every way. Twitter increasingly skews toward
younger users, new research finds.
Teens are leaving bigger social networks for the privacy of messaging
apps, but experts say Twitter is managing to hold on to more of this sought-after
younger demographic than its bigger rival. The percentage of teens active on
Facebook dropped by 9% during 2013 and by 7% on YouTube, according to a global survey of over 40,000
Internet users by research firm GlobalWebIndex — but only fell by 3% on
Twitter. Twitter is also the preferred social network by 27% of adolescents
versus 23% for Facebook, according to the “Spring 2014” survey of 7,500 U.S.
teens by Piper Jaffray; in Spring 2013, Facebook beat Twitter by 33% to 30%.
(Facebook declined to comment.)
“Twitter still has the cool factor,” says Daniel Miller, a professor of
anthropology at University College London who is currently studying students’
use of social networks. Teens use Facebook to send party invites and
communicate with their families, but they mostly use Twitter to communicate
with each other, he says.
“This has no relation to what you and I know about
Twitter,” Miller adds. They use it for instant messaging, posting images and
celebrity news, he says. Jason Mander, head of trends at GlobalWebIndex,
agrees.
“Twitter hasn’t been around for as long as Facebook and also has a
younger age profile in terms of its active users, making it feel a little more
relevant for some younger users,” he says
More
Next, more “public
conditioning” in America’s relentless push for war with Russia over their botched
coup in Kiev. We are now mere pawns in a global game of putsch and counter
putsch, an American power play intended to slice and dice up Russia. From a
Russian perspective, an existential game that always ends in a nuclear
exchange. Below, America’s discredited Secretary of State makes yet another
dubious claim.
"If
current trends continue, the typical U.S. worker will be considerably more
productive several decades from now. Thus, one might argue that letting future generations bear the burden of
population aging is appropriate, as they will likely be richer than we are even
taking that burden into account."
Dr. B. S. Bernanke. 2006.
Ukraine separatists push east as US intercepts Moscow orders
John Kerry says US has roof that Russia is behind rebellion in country's east, as militants seize regional government building in Luhansk
By Roland Oliphant, in Slavyansk
and Bruno Waterfield in Brussels
9:03PM BST 29 Apr 2014
Hundreds of pro-Russian
separatists, some armed with assault rifles, seized government buildings and
laid siege to police headquarters in a second Ukrainian regional capital on
Tuesday as they expanded the reach of their rebellion against Kiev.
Their storming of regional
administration and prosecutor's office in Luhansk, just 15 miles from the
Russian border, came as John Kerry, the US secretary of state, revealed that
American eavesdroppers have overheard intelligence operatives being directed by
Moscow.
"We know exactly who's
giving those orders, we know where they are coming from," he said, in
remarks to a private meeting that were leaked on Tuesday.
"Intel is producing taped
conversations of intelligence operatives taking their orders from Moscow and
everybody can tell the difference in the accents, in the idioms, in the
language."
The new seizures in Luhansk, 80
miles east of the centre of the rebellion in Donetsk, suggest that the
separatists are continuing the pattern of occupations that has spread across
eastern Ukraine over the past month.
----The leaked tape of John Kerry, the US Secretary of State, speaking on Friday, highlighted American concerns over operations run by the GRU inside East Ukraine.
"It's not an accident that
you have some of the same people identified who were in Crimea and in Georgia
and who are now in east Ukraine," he said, according to the Daily Beast
website. "This is insulting to everybody's intelligence, let alone to our
notions about how we ought to be behaving in the 21st century. It's thuggism,
it's rogue state-ism. It's the worst order of behaviour."
More
In
continental European news, the news was more of the same. In our new lawless
era, dodgy Swizz banksters playing fast and loose with US tax laws. Why do
these banks still have US banking licences? Tax and work shy Greeks, remaining
true to form. They should have dumped
the euro and stuffed Europe’s banksters while they had the chance. Now with a government
run from Berlin, it’s like being back under the Ottoman Turks. The Bilderberger
euro was never meant to be like this.
"At
this juncture, however, the impact on the broader economy and financial markets
of the problems in the subprime market seems likely to be contained. In
particular, mortgages
to prime borrowers and fixed-rate mortgages to all classes of borrowers
continue to perform well, with low rates of delinquency."
Dr. B. S. Bernanke. 2007.
Swiss Enabler to Plead Guilty in Credit Suisse Tax Case
Apr 29, 2014 10:27 PM GMT
The founder of a Swiss trust company that federal prosecutors say worked
with Credit Suisse Group AG (CSGN) to help American clients
evade taxes is expected to plead guilty tomorrow in Virginia, according
to court records. Josef Dorig will appear in federal court in Alexandria, where he was arrested today and released on $150,000 bail, records show. Dorig was indicted in 2011 with seven Credit Suisse bankers on a charge of conspiring to help the bank’s U.S. clients hide $4 billion from the Internal Revenue Service.
Dorig’s guilty plea would follow that of former Credit Suisse banker Andreas Bachmann, who admitted on March 12 that he helped American clients evade taxes. Bachmann is cooperating with prosecutors amid a U.S. probe of Credit Suisse, the largest of 14 Swiss banks under U.S. criminal investigation in a crackdown on offshore tax evasion.
Bachmann admitted his guilt after a report by the Senate Permanent Subcommittee on Investigations said Credit Suisse helped 22,000 Americans hide as much as $10 billion from the IRS. Chief Executive Officer Brady Dougan apologized to the panel at a Feb. 26 hearing, saying a small group of Swiss-based bankers appear to have broken U.S. law and fooled top managers.
He said bankers worked with outside intermediaries to help U.S. clients set up offshore shell entities with money deposited at Credit Suisse in the names of the entities rather than the clients. Such conduct, Dougan said, was egregious.
----In pleading guilty, Bachmann admitted he conspired with Dorig, who worked at a Credit Suisse subsidiary to help U.S. customers open secret accounts and set up nominee accounts in tax havens.
Credit Suisse said in 1997 it was “too risky” for Dorig to form such entities within the bank. Instead, the bank “announced that the formation and management of nominee tax havens should be done from outside,” Bachmann admitted.
Dorig then formed a Swiss trust company in Zurich, according to the indictment.
More
Greek Nightclub Basements Focus of Tax-Evasion Dragnets
Apr 29, 2014 11:01 PM GMT
It’s Saturday night going on Sunday morning at a club near the gated homes
of the Greek elite in northern Athens as two men and a woman in business suits push through
the crowd and demand to see the cash register. The manager sighs. It’s the tax man.
The inspectors are the new face of Greece’s fight against an age-old problem of tax evasion. Their mission: to check whether the club has given customers automated receipts that allow officials to track sales. In Greece, clubs, bars and restaurants have often avoided that paper trail to understate their revenue and reduce income- and sales-tax payments.
As the country capitalizes on its first bond sale in four years and weans itself off 240 billion euros ($331 billion) in international loans, the authorities still must prove they can collect enough taxes to survive without aid. Even performing the most basic of state duties means overturning a tax-dodging culture rooted in centuries of occupation by Ottoman Turks followed by decades of apathy by the Greek state.
----The scale of the shadow economy illustrates the potential for Greece to transform its finances by clamping down on tax evasion. Undeclared activity was 24 percent of output in 2012, compared with a European Union average of 15 percent, and concealed work averaged 25 percent between 1995 and 2006, the EU says. Even government officials recognize the problem had become endemic.
“Historical and political factors, including a weak state, gave rise to widespread tax evasion in Greece,” said Aikaterini Savvaidou, a government adviser and tax-law lecturer at Aristotle University in Thessaloniki. “For many years, Greeks knew they could get away with it. That’s slowly changing as the law and government controls improve.”
----Bloomberg News observed about 20 surprise inspections in Athens over a recent weekend on the condition that the names of the targeted businesses, the people involved and their precise locations were withheld. The missions showed both how much the Greek government is doing to tackle tax evasion and how far Greek society still has to go to accept the crackdown.
At the club in Athens’s affluent northern neighborhood, the staff members keep serving drinks and try to avoid eye contact as the inspectors stand at the bar and the manager prints a list of the night’s sales. The boss suffers an anxious half-hour wait as the officials, with dance music blaring, retreat to a table near the toilets to study the papers before concluding there’s been no violation.
More
We end today
with yet more disarray in UK politics. As Scotland stumbles its way towards the
breakup of the United Kingdom, the UK’s weak coalition government can’t get out
of its own way. Both parties in it have deeply alienated their former base. Only
the incredible incompetence of the opposition leadership, prevents for the time
being, a John Major like rout. In the run up to the Scottish devolution
referendum, and next year’s general election, politic’s in the UK is about to
get shrill and ugly. Pounds anyone?
"It is
not the responsibility of the Federal Reserve – nor would it be appropriate –
to protect lenders and investors from the consequences of their financial
decisions."
Dr. B. S. Bernanke. 2007.
Nigel Farage could become MP within weeks after Mercer quits
Nigel Farage said he is giving 'serious consideration' to standing after former Tory minister Patrick Mercer stepped down over cash for questions scandal
Nigel Farage could win a seat at
Westminster within weeks after a disgraced Conservative backbencher quit the
Commons and forced an unexpected by-election.
In a significant blow to the
Tories, Patrick Mercer stepped down as MP for Newark on Tuesday night, only
days before he was due to be suspended from Parliament for six months.
His decision comes after a joint
investigation by The Telegraph and the BBC’s Panorama programme disclosed that
Mr Mercer had tabled a series of parliamentary questions and put down a motion
after accepting £4,000 from undercover reporters.
David Cameron now faces the
prospect of Mr Farage, the UK Independence Party leader, mounting a serious
challenge in what was one of the Conservatives’ safest seats, with a 16,000
majority.
----The by-election
will follow days after the May 22 European elections, in which Ukip is expected
to humiliate the Tories.
In a statement, Mr Mercer said he
was “ashamed” of his actions but gave only muted support for the new Conservative
candidate, Robert Jenrick, 32, a father of two who is the business director at
Christie’s auction house.
Mr Mercer said: “I’m an
ex-soldier and I believe that when I’ve got something wrong, you’ve got to fess
up and get on with it, no point in shilly-shallying. What’s happened has
happened and I’m ashamed of it.
As he made his statement on
College Green, outside the Houses of Parliament, Mr Mercer was flanked by
Bernard Jenkin MP, a Tory rebel who is seen as a critic of the Prime Minister,
and Col Bob Stewart, a Tory MP who served with the Army in Bosnia.
Asked whether he would like Mr
Farage to stand in his former seat, Mr Mercer smiled but declined to reply.
Lord Ashcroft, the former deputy
chairman of the party who has been critical of Mr Cameron, said later: “David
Cameron should not be surprised that Patrick Mercer has given him a teeny weeny
headache. What goes around etc.”
More
"The
Federal Reserve will not monetize the debt."
Dr. B. S. Bernanke. 2009.
At the Comex
silver depositories Tuesday
final figures were: Registered 53.23 Moz, Eligible 121.32 Moz, Total 174.55 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today more on “Bubbleland.” The Fedster’s
mismanaged central bank planned and distorted, wealth destroying, mis and
mal-allocation of capital. Thanks to the Great Nixonian Error of fiat money we
have become the new Soviet Union. When this Great Delusion ends, don’t expect
much of a different outcome. Stay long fully paid up physical precious metals.
We are one Lehman, one war, one recession, one El Nino, one implosion in Argentina,
Brazil, China, Turkey, South Africa, the European Union, away from the end of
the Great Nixonian Error as we knew it.
Below, another Bernocchio bubble meets its end.
Well, I Did Tell You So: The Texas Gas Bubble Massacre (TXU) Was Bankrupt From Day One
by David Stockman •
n light of today’s TXU bankruptcy
filing, the following excerpt from Chapter 25 of The Great Deformation: The
Corruption Of Capitalism In America is possibly salient. It shows
that the largest LBO in history—-a monster $47 billion deal—-was well and truly
bankrupt from day one. And the Fed’s foolish “wealth effects” policy of
coddling Wall Street was effectively the mid-wife to disaster.
The wildest speculators in Leo
Melamed’s pork-belly rings at the Chicago Merc could never have dreamed up a
commodity trade as fantastical as that underlying the $47 billion LBO of TXU
Corporation. It was basically a bet on a truly aberrational price gap between
cheap coal and expensive natural gas—a “fuels arb”—that couldn’t possibly last.
So the largest LBO in history was the ultimate folly of bubble finance.
THE TEXAS GAS BUBBLE MASSACRE
Electric power utilities are normally stable generators of cash flow, plod-
ding along a tepid path of growth. But TXU’s financial results in the year
before its February 2007 buyout deal had been mercurial, making its ini- tially
benign leverage ratios an illusion. Thus, TXU had posted about $11 billion of
revenue and $4.5 billion of operating income prior to the buyout, but by fiscal
2011 the company’s sales were down by 35 percent, to $7 billion, and operating
income was just $960 million. Its bottom line had plummeted by nearly 80
percent from the pre-LBO level.
Accordingly, the company’s leverage ratio has become a horror show. Its fiscal
2011 debt stood at $36 billion and thereby amounted to nearly thirty-eight
times its reported operating income. In LBO land that ratio is beyond the
pale—it’s a veritable financial freak.
How the largest LBO in history
ended up this far off the deep end is a crucial question because it goes right
to the heart of the great deformation of finance. The TXU deal is the financial
“Vietnam” of the Greenspan bubble era, not some dismissible aberration from the
main events. It was sponsored by the “best and brightest” in the private equity
world including KKR, the founding fathers of LBOs, and David Bonderman’s TPG,
which was also a successful LBO pioneer of legendary rank.
Since the equity portion of the
financing at $8 billion was only 17 per-
cent of the total capitalization, TXU’s existing $12 billion of conventional utility debt had to be tripled, to $38 billion, in order to close the deal. Ac- cordingly, Wall Street had a money orgy coming and going. Fees on the new deal exceeded $1 billion, and at the LBO closing there was an epic $32 billion payday for selling shareholders, including the hedge funds which had front-run the deal.
cent of the total capitalization, TXU’s existing $12 billion of conventional utility debt had to be tripled, to $38 billion, in order to close the deal. Ac- cordingly, Wall Street had a money orgy coming and going. Fees on the new deal exceeded $1 billion, and at the LBO closing there was an epic $32 billion payday for selling shareholders, including the hedge funds which had front-run the deal.
At the time, the reckless wager
embodied in the TXU buyout was ration- alized as nothing special. The purchase
price at 8.5 times EBITDA was purportedly in line with the 7.9X average for
publicly traded utilities. Yet when the onion was peeled back by a year or two
it became clear that the buyout was being set up at a lunatic multiple: an
astonishing 18X the company’s EBITDA in 2004.
This jarring difference reflected
the fact that TXU’s income was tem- porarily and drastically inflated by a
utility deregulation bubble floating on top of a natural gas bubble. Under the
Texas deregulation scheme, wholesale electric power prices were set by the
marginal cost of supply, which was natural gas fired power plants. But TXU
generated most of its power from lignite coal and uranium, so when natural gas
prices soared its own fuel costs remained at rock bottom. The company’s revenue
margin over the cost of fuel, therefore, also soared, rising from 38 percent in
2004 to nearly 60 percent in 2006. The gain was pure profit.
----This debt-driven explosion of reserves, production, and injected storage eventually left giant drillers like Chesapeake gasping for solvency; massive new gas supplies caused prices to steadily weaken and then crash. By the spring of 2012, natural gas was trading at a price so devastatingly low ($2.50 per Mcf ) that even the monster of the gas patch, ExxonMobil, cried uncle. “We are losing our shirts” complained its CEO, Rex Tillerson.
With little prospect that natural
gas will revive anytime soon, TXU’s rev- enues and operating income will remain
in the sub-basement. The $36 bil lion of LBO debt raised at the top of the
Greenspan bubble is therefore almost certain to default owing, ironically, to
the aftershocks of the even larger debt bubble which fueled the fracking binge.
The larger point is that
artificially cheap debt causes profound distor- tions, dislocations, and
malinvestments as it wends its way through the real economy. In this case
underpriced debt fostered a giant, uneconomic LBO and also massive
overinvestment in natural gas fracking. When the collision of the two finally
brings about the thundering collapse of the largest LBO in history, there
should be no doubt that it was fostered by the foolish money printers in the
Eccles Building and the LBO funds who took the bait.
More
"The risk
that the economy has entered a substantial downturn appears to have diminished
over the past month or so."
Guess who, June 2008.
The monthly Coppock Indicators finished March
DJIA: +197 Down. NASDAQ: +357 Up. SP500: +254 Down.
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