Baltic Dry Index. 1017 +24
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“The boom can last only as long as the
credit expansion progresses at an ever-accelerated pace. The boom comes to an
end as soon as additional quantities of fiduciary media are no longer thrown
upon the loan market...”
Ludwig Von Mises
Below, the glass is half full, the glass is half empty. America’s labour statistics, published Friday,
speak with forked tongue. The US
economy, supposedly in a strong recovery thanks to QE and ZIRP appears to be
wobbling like China’s. Over the last year the US population grew by 2.2
million, not including illegals, but the US workforce rose by an insignificant
60,000. It doesn’t take a genius to see that either the statistics are doctored
and meaningless, or that the US economy isn’t in recovery.
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
Hiring in U.S. Kicks Into Higher Gear as Unemployment Plunges to 6.3%
May 2, 2014 10:01 PM GMT
America’s job-creation machine kicked into higher gear in April as employers
boosted payrolls by the most in two years and the jobless rate plunged to the
lowest since the collapse of Lehman Brothers. The 288,000 gain in employment marked the biggest upside surprise since February 2012 and followed a 203,000 increase the prior month, Labor Department figures showed today in Washington. Unemployment dropped to 6.3 percent, the lowest level since September 2008.
“The economy is gathering momentum after the bad winter,” said Michael Gapen, senior U.S. economist at Barclays Plc in New York, whose firm’s projection of 250,000 was among the closest in the Bloomberg survey. “It’s a very balanced number in the sense that we got it in goods as well as services.”
The report was not without pockets of weakness as wages stagnated and workforce participation matched a 36-year low. Nonetheless, job growth was broad-based and the hiring pace accelerated at factories, builders and service providers after households spent more freely as the first quarter drew to a close, showing the economy is perking up.
More
Seemingly terrific April jobs report poses strange puzzle
May 2, 2014, 1:00 PM ET
Funky job reports are not
unusual, and the employment data for April certainly fits the bill. How else to
explain the biggest gain in hiring in more than two years – at the same time
the labor force shrank by the second largest amount in 32 years.
Let’s review. The U.S. added
288,000 jobs in April, the biggest spike since January 2012. The increase in
employment is measured by the so-called establishment survey that quizzes
private firms, government worksites and nonprofit institutions.
Yet the size of the labor force
sank by 806,000. That’s the biggest drop since a 848,000 plunge in October and
you have to go all the way back to 1981 to find another 800,000-plus decline.
Labor-force changes are measured by the “household” survey that interviews
Americans directly.
Typically a shrinkage in the
labor force occurs when people become so discouraged about finding a job that
they give up looking for work. Yet the April surge in hiring would suggest that
more jobs – not fewer – are available.
“You have drastically different
messages offered by the establishment and household surveys,” said Stephen
Stanley, chief economist of Pierpont Securities. He called the report
“puzzling.”
What’s also odd about the decline
in the labor force is how it happened. The number of so-called re-entrants –
unemployed workers who have started looking for jobs again – fell by a whopping
417,000. That’s the biggest drop since the government began keeping records in
1967.
And new entrants into the labor
force, such as graduates or immigrants, fell by 126,000. That’s the biggest
decline in more than five years.
Put another way, two-thirds of
the drop in the labor force stemmed from people choosing not to enter in the
first place. Normally a decline takes place when workers exit the labor
force.
----Another factor could be the end of extended unemployment benefits on Dec. 31. Many Americans who were getting extra government checks may have stopped looking for work in the spring – a legal stipulation for receiving benefits – once they realized the added payments would not get reauthorized by Congress.
Whatever the case, the labor-force decline undercuts the feel-good story posed by the sharp drop in the U.S. unemployment rate to 6.3% from 6.7%, the lowest level since fall 2008. Read: The household survey is insane.
“The unemployment rate fell for the wrong reason,” Stanley said. “We shouldn’t be encouraged by that.”
More
Shocking US jobs data impugns recovery, Fed tapering
Friday's figures are a warning that the US recovery may be losing momentum
The US economy has delivered two
minor shocks in a week, prompting concerns that bond tapering by the Federal
Reserve may be doing more damage than expected.
Non-Farm Payrolls data released
on Friday shows that the workforce shed 806,000 jobs in April, a stunning drop
that cannot plausibly be blamed on the weather. Wage growth and hours worked
were both flat and the manufacturing hours per week fell.
This follows news earlier in the
week that the economy to a halt in the first quarter. Growth plummeted to 0.1pc
and is now well below the Fed’s “stall speed” indicator. Analysts blamed this
on the freezing polar vortex over the winter.
Yet the jobs data confirm a
disturbingly weak picture. The headline unemployment rate fell to 6.3pc but that
was only because the labour “participation rate” plummeted back to a modern-era
low of 62.8pc, last seen in 1978 when there were far fewer women in the
workforce. The rate for males is the lowest ever recorded at 69.1pc
The jobs market is highly volatile – and is often revised
later – but the data are a warning that the US recovery may be losing momentum.
Lakshman Achuthan, from the Economic Cycle Research Institute, said the trend
was already weakening long before the cold weather. “We see a failure to
launch. We’re decelerating, not accelerating, and that is a big concern,” he
said.
The Fed has gradually been
turning down the spigot of dollar liquidity, reducing its bond purchases by
$10bn a month at each meeting, even though the bank’s measure of core PCE
inflation has dropped to 1.1pc. The net stimulus has dropped from $85bn a month
to $45bn.
This is a form of monetary
tightening. Interest rates have not risen – though they are rising in real
terms – but the quantity of money mechanism may nevertheless be having a
powerful effect. The broadest measure of the money supply – Divisia M4 – has
dropped from a growth rate above 6pc a year ago to just 2.6pc in March
---- Erica Groschen, from the Bureau of Labour Statistics, said the sudden drop in jobs last month was caused by fewer people joining the workforce, rather than people leaving. That is hardly reassuring, and conflicts with theories that the participation rate is falling because people are choosing to retire early.
The weakness may be nothing worse
than a pause for breath – or a mid-cycle correction – as the US gears up for a
second leg of the post-Lehman expansion. The risk is that this instead proves
to be the end of growth cycle that is already long in the teeth by historic
standards.
The possibility of a fresh
downturn with the interest rates already at zero, the Fed’s balance sheet
already at $4 trillion, and gross public debt above 100pc of GDP for the first
time since the end of the Second World War is what keeps US economists awake
night. There is little margin for policy error.
More
We end for today,
the UK’s bank holiday version of the Worker’s May Day holiday imposed by Europe
instead of our Whitsun bank holiday, with David Stockman raising the biggest
red flag yet on China. Forget a China Wobble, he posits, China is a house of
cards, credit bubble economy, built on quicksand in an earthquake zone. When it
bursts, and it seems to be bursting now, the great mineral export nations are
likely to blow up as well.
“But it (the boom) could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole monetary
system.”
Ludwig Von Mises
Zaitech With A Chinese Accent: Beijings Tepid Efforts To Slow The Credit Boom Are Springing Giant Leaks With Classic End of Bubble Earmarks
by David Stockman •
China is a case
of bastardized socialism on credit steroids. At the turn of century
it had $1 trillion of credit market debt outstanding—-a figure which has
now soared to $25 trillion. The plain fact is that no economic system can
remain stable and sustainable after undergoing a 25X debt expansion in a mere
14 years.
But that axiom is true in spades
for a jerry-built command and control system where there is no free
market discipline, meaningful contract law, honest economic information or
even primitive understanding that asset values do not grow to the sky. Nor is
there any grasp of the fact that the pell-mell infrastructure building
spree of recent years is a one-time event that will leave the economy
drowning in excess capacity to produce concrete, steel, coal, copper,
chemicals and all manner of fabrications and machinery, such as backhoes
and cranes, which go into roads, rails and high rises.
The borrowing, building and
speculating mania in China has obviously gotten so extreme that even the new
regime in Beijing has been desperately trying to cool it down. But this
will end up as a catastrophic failure—not the “soft landing” brayed about by
Wall Street bulls who do not have the slightest comprehension of the difference
between free market capitalism and the phony “red capitalism” that has been
confected by the party-controlled apparatus of the massive, intrusive,
bureaucratic and hierarchically-driven Chinese State.
At bottom the fatal error among
China bulls is the failure to recognize that the colossal boom and
bust cycle that China is undergoing is not symmetrical. The much
admired alacrity by which the state guided the export boom after 1994 and the
infrastructure boom after 2008 is not evidence of a superior model of
governance; its only proof that when credit, favors, subsidies,
franchises and speculative windfall opportunities are being passed out
freely and to everyone, when there are all winners and no losers ( e. g.
China’s bankruptcy rate has been infinitesimal), a statist regime can appear to
walk on water.
But what it can’t do is walk
the bubble back to stable ground. The boom phase unleashes a buzzing,
blooming crescendo of enterprising, investing, borrowing and speculating
throughout the population that cannot be throttled back without resort to
the mailed fist of state power. But the comrades in Beijing have been in the
boom-time Santa Claus modality for so long that they are reluctant to unleash
the economic gendarmerie.
That’s partly because
their arrogance blinds them to the great house of cards which is China today,
and partly because they undoubtedly understand that the party’s
popularity, legitimacy and even viability would be severely jeopardized if they
actually removed the punch bowl. Just look at the angry crowds which mill
about when a bankrupt entrepreneur skips town and locks up his factory sans all
the equipment; or when developers are forced to discount vastly
over-priced luxury apartment units they sold to middle class
savers/speculators; or when banks attempt to disavow
repayment responsibility for “trust products” they sold out the backdoor
through affiliates; or the growing millions of rural peasants who have been
herded into high-rises without jobs after their land was expropriated by
crooked local officials and developers trying to make GDP quotas and a quick
fortune, respectively.
More
The Perilous China-Driven Commodity Boom: Vale Has Spent $50 Billion On CapEx Since 2008 And The Iron Ore Glut Is Just Beginning
by Contributor •
----Vale is one company that many people follow and many seem to like once again for a number of fair reasons (low cost producer, volume growth potential, solid balance sheet, has fallen a lot, tax blow behind us, asset write downs over?, already impacted by Brazil outflows…), but I feel investment odds aren’t good enough yet. We live in a wide World and there are plenty of alternative contrarian investments out there with a more favourable starting point.I could be missing out on Vale but there are a number of points that still make me quite wary, especially when so many seem to be pushing the name and few mention the following:
1.- Iron Ore price downside
Who dares forecast commodity prices? Prediction is VERY difficult, especially about the future (Niels Bohr). That is why what investors should care about is profit margins, which invariably mean revert. It is rather well understood that commodities prices eventually revert to the 90th percentile production cost level. We have already seen this for most metals/commodities already (link).
Iron ore and copper are the main ones lagging still.
Consequently the potential for profit margin compression is a major overhang
for Vale (80% EBITDA from iron ore). It is worth to note that China is slowing
down iron ore consumption growth while the iron ore majors continue to increase
production volumes. Industry players expect c. 700MM Mt additional iron ore
volumes by 2020. As most investors know China accounts for 67% of the seaborne
iron ore market (and 99% of the growth for the period 2005-13). Going forward
many people forecast oversupply every year even though they keep some China
growth (c. 300MM Mt or 35% by 2018) and they throw in some growth in Japan, US
and EU, which haven’t had growth in decades…I am not sure I would bet big on
that.
Iron ore majors are mostly responsible for additional capacity. And they will bring it in any case as they sit at the low end of the cost curve and expansion projects are ongoing already. By 2020 current global volumes could be fulfilled at c.-$40/Mt vs. today 90th percentile.
The combination of all the above suggests downside risk to prices/margins. Anyone making a buy case for Vale on the back of iron ore prices today has a difficult point to prove given the very unfavourable odds. I would be much more comfortable to buy if I saw sell side forecasting long term iron ore some 20-30% lower from here.
More
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker
At the Comex
silver depositories Friday
final figures were: Registered 54.80 Moz, Eligible 118.29 Moz, Total 173.09 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on our lawless age. British freedom, 21st
century style. We have ways of making you a serf. So much for a free press. And just wait for the next Tony Blair in 2015.
“The
only security of all is in a free press.”
Thomas
Jefferson.
Elderly woman banned from talking to the press for life in court ruling
A 94 year-old woman is subject to a permanent court order banning her from talking to the press after judge ruled she lacked 'mental capacity'
A 94 year-old woman has been
gagged by a High Court judge from talking to the press after a local council
tried to force her from her home.
In what is believed to be an
unprecedented move, the former NHS midwife is now subject to a permanent order
banning her from speaking to the press after the judge ruled that she did not
have the mental capacity to do so.
Court of Protection judge Mrs
Justice Russell granted the order in response to an application by Redbridge
Council.
During the course of the hearing
the woman, who was in court, got up from her wheelchair with the aid of a stick
to tell the judge: "They think I am a stupid old woman and can do what
they like and I want them out of my life."
The judge, who referred to her as
Miss G after it was ruled she could not be identified, declared that it was
"not in her best interests to communicate with the press".
She added: "G lacks capacity
to litigate, and to make decisions about her care, residence, and contact with
others, including communications with the press."
Redbridge Council had accused the
woman's live-in carer" and her husband of undue influence and sent social
workers to investigate before applying for Miss G to be moved from her home.
In a hearing in March another
judge Mr Justice Cobb said there was "concern" by Redbridge Council
that the woman's carer was "influencing" the woman to "involve
herself in publicity in order to further an agenda".
Moves had been made by Redbridge
Council to remove the carers but the latest independent social worker report
has recommended they stay.
During previous hearings, the
court was told that Redbridge social workers, accompanied by police, turned up
at Miss G’s house 12 times in nine months after her carers moved in.
In a hearing in March Mr Justice
Cobb said Miss G had taken part in a protest outside a town hall in Ilford,
east London, about the local authority's involvement with her case.
She had been taken to the Houses
of Parliament and signed a petition asking the Government to intervene in her
"dispute with the local authority".
The judge said there had also
been "communication" between the woman and members of the press.
Redbridge council threatened the
carer and her husband with a separate injunction, preventing them from speaking
to the press but the couple voluntarily gave a court undertaking not to talk to
the press.
The judge made clear at an
earlier hearing that Miss G's wish to remain in her own home and not be moved
out should be accepted.
http://www.telegraph.co.uk/news/uknews/law-and-order/10804691/Elderly-woman-banned-from-talking-to-the-press-for-life-in-court-ruling.html
“The liberty of the press is indeed essential to the nature of a free state: but this consists in laying no previous restraints upon publications, and not in freedom from censure for criminal matter when published. Every freeman has an undoubted right to lay what sentiments he pleases before the public: to forbid this, is to destroy the freedom of the press: but if he publishes what is improper, mischievous, or illegal, he must take the consequence of his own temerity.”
William
Blackstone, Commentaries on the Laws
of England, First Edition 1765-1769
The monthly Coppock Indicators finished April
DJIA: +189 Down. NASDAQ: +347 Down. SP500: +249 Down. Sell in May, go away.
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