Baltic Dry Index. 890 -04
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"We
take a decision, then put it on the table and wait to see what happens. If
there is no protest, because most people have no idea what we are doing, we
take step after step until we are beyond the point of no return."
Jean-Claude
Juncker.
We open today with a look back in history. One hundred
years ago today, Europe was still many happy days away from a continental
calamity. And they didn’t even have the wealth destroying euro!
Daily Telegraph July 3 1914
Kaiser Wilhelm II's attack of lumbago prevents him attending Archduke Franz Ferdinand's funeral
----Meanwhile there was little more news concerning arguably the main event of 1914. There were more revelations of the assassination plot on page 12, a report of Austro-Serb tension in Sarajevo over the previous month and details of the journey of the coffins back to Austria; whilst page 11 reports that an attack of lumbago will prevent Kaiser Wilhelm II’s attendance.
Also in today’s paper
- The law reports on page 6
include two cases involving bodies in the River Thames
- The victorious England Polo
team’s return to London takes up a whole column on page 7, and a golfing
column inspired by the death of Lord Wemyss takes up even more
- A Royal Navy Lieutenant-Commander
is dismissed from the service after being drunk at the funeral of a member of
his ship’s company – page 7
In stock market bubble news, it’s still to infinity
and beyond. The Fed’s final bubble grows and grows. For more on “tulip-mania,”
scroll down to Crooks Corner.
Below, the bubble on both sides of the Atlantic.
Will the ECB’s top Illuminati illuminate today?
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
July 2, 2014, 4:07 p.m. EDT
U.S. stocks edge up to records again, but no Dow 17,000
GoPro falls for first time since debut
NEW YORK (MarketWatch) — U.S. stocks mostly inched higher
Wednesday, building slightly on the prior day’s sizeable advance, as a
better-than-expected report on private-sector hiring underscored the economy’s
recent strength.
The
Dow industrials DJIA
+0.12% rose
20.17 points, or 0.1%, to end at 16,976.24, putting it once again within
striking distance of 17,000, while the S&P 500 SPX
+0.07% nudged
up 1.30 points, or 0.1%, to finish at 1,974.62. Each index scored a record
close for the second straight day.
The Nasdaq COMP
-0.02% bucked
Wednesday’s positive trend, falling 0.92 point, or less than 0.1%, to close at
4,457.73. The tech-heavy index snapped a three-session winning streak
Investors
are awaiting Thursday’s monthly jobs report, and even a surprisingly strong private-sector jobs report couldn’t jolt
the market to life. Thursday’s report is expected to show a net gain of 215,000 non-farm jobs and
a steady 6.3% unemployment rate.
More
Yellen Says Financial Instability Shouldn’t Prompt Rate Change
Jul 3, 2014
5:00 AM GMT
Federal Reserve Chair Janet Yellen said concerns about financial stability
shouldn’t prompt a change in current monetary policy while flagging “pockets of
increased risk-taking” in the financial system. Yellen delivered a comprehensive salvo in the global debate among central bankers over whether interest rates should be a first-order tool to curb financial excess, saying supervision should be “the main line of defense” against turmoil.
“Monetary policy faces significant limitations as a tool to promote financial stability,” Yellen said yesterday at the International Monetary Fund in Washington. “Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach.”
Yellen said the “primary role” should fall to a macroprudential approach, a combination of multiagency oversight, attention to bank capital and liquidity, and regulatory pressure to create buffers against failure.
“She’s reflecting and also moving toward the leading edge of what’s going on in central bank management of bubbles and the view of bubbles,” said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago.
More
ECB Watchers in the Dark Look to Draghi for Illumination
Jul 3, 2014 12:01 AM GMT
Mario Draghi has some explaining to do. A month after the European Central Bank president unveiled a bevy of standard and non-standard fixes for the euro area’s faltering recovery, economists are in disagreement about how long interest rates will stay near zero and in the dark on the details of a plan to boost lending. Draghi may use today’s appearance in Frankfurt as an opportunity to enlighten them.
As the Federal Reserve and the Bank of England feel their way out of crisis-era support for their economies, the ECB is still steering against the risk of a relapse. Draghi’s guidance -- should he choose to give any -- on how he expects rates to develop over the next two to four years will be crucial in bolstering investors’ optimism that the worst is truly over, while reassuring them that protection won’t be removed before they’re ready.
“My understanding is that Draghi is signaling rates aren’t going to go up before the end of 2016,” said Nick Kounis, head of macro research at ABN Amro Bank NV in Amsterdam. “However, the way he has brought the four-year duration of the targeted loans into the equation seems to have been aimed at misdirection, as if he was trying to say rates will stay where they are even longer. But once you start going that far out you lose credibility.”
Official
interest rates will be kept on hold when policy makers meet today, according to
all economists surveyed by Bloomberg News. The Governing
Council will release its monthly decision at 1:45 p.m. in Frankfurt, and Draghi
will speak at a press conference 45 minutes later.
More
In other Europe news, maybe continental Europe isn’t
going to commit economic suicide after all, just to bail out President Obama’s
botched coup in Kiev. From faraway London, it looks suspiciously like some
horse trading over the Ukraine is taking place between Germany and Russia. Not
to worry, the NSA will keep President Obama informed.
Putin’s Economic Push Revives Former Soviet Ties in East Europe
Jul 2,
2014 11:01 PM GMT
A quarter of a century ago, when the communist regimes in central and
eastern Europe
tumbled one after another, the economically devastated Soviet
Union could do nothing but watch. The USSR fell apart, and eastern Europeans rushed to join the North Atlantic Treaty Organization and the European Union. In its former sphere of influence, instead of sending troops like it once did, Russia is now building a web of economic ties with its old satellites. Whether it’s bankrolling a Hungarian nuclear power plant or the South Stream pipeline in Bulgaria, Russian money is buying leverage in eastern Europe, Bloomberg Businessweek reports in its July 7 edition.
Some countries in the region find it increasingly counterproductive to act against Russia’s interests, even as the nation tangles with Ukraine. Hungarian, Slovak, and Czech politicians have openly opposed stricter EU sanctions against Russia, as they seek to preserve access to its energy resources and consumer market of about 140 million people.
“The Russians are playing a classic game of divide and conquer with the EU,” said Otilia Dhand, an analyst with Teneo Intelligence, a political risk adviser. “They’re making sure that the national interests of individual members have bigger weight in their decision-making than the common EU interest.”
One of Russia’s weapons is OAO Sberbank, its largest state-controlled lender. In the past few years, with almost 12 billion euros ($16 billion) in assets, Sberbank Europe has built a presence in central Europe and throughout the Balkans. Besides expanding its branch network, it’s providing hefty loans to companies in former communist Europe.
In March, the bank agreed to lend $820 million to Agrokor d.d., a Croatian company that’s now acquiring Slovenia’s rival Mercator Poslovni Sistem. The deal will create the top food retailer in the Balkans.
Russia’s main focus is energy. Early this year it secured a presence in the industry in the EU when it agreed with Hungary to build two nuclear reactors. To finance the project, the Kremlin offered the Hungarians as much as 10 billion euros in a 30-year loan at below-market rates—conditions no western European commercial bank could match.
In June Sberbank announced it would provide a $1.2 billion credit line to Slovenske Elektrarne AS, the Slovak power company controlled by Italian utility Enel. Slovenske Elektrarne has been struggling to finish the country’s Soviet-designed Mochovce nuclear power plant.
More
EU Powers Move Russia and Ukraine Closer on Truce Talks
Jul 2,
2014 10:00 PM GMT
Ukraine and Russia moved
closer to a sustainable truce in talks brokered by Germany and France after
President Petro Poroshenko resumed his offensive against pro-Russian rebels
inspired by Crimea’s secession. The bloodshed in eastern Ukraine has reached a “dramatic climax” in the past few days, prompting the four countries to pledge to work for a comprehensive cease-fire in another round of talks by July 5, German Foreign Minister Frank-Walter Steinmeier said after meeting his counterparts in Berlin late yesterday. “It is a first and important step toward a mutual cease-fire,” Steinmeier told reporters.
The
four countries agreed to “use their influence on the concerned parties” to end
the fighting and invite the Organization for Security and Cooperation in Europe to deploy
observers to monitor the checkpoints along the Russia-Ukraine border, according
to a joint statement.
“We are trying as best we can to achieve a sustainable cease-fire,” Russian Foreign Minister Sergei Lavrov said in the German capital. The agreement is “better late than never,” Lavrov told reporters.
Ukraine’s acting defense minister, Mykhaylo Koval, said earlier yesterday that there’s increasing evidence that Russia is tightening security along its frontier to prevent insurgents from entering Russia
More
In USA Pentagon news, the military just can’t get
enough of deserts, even if only in penny-packet deployments under President
Obama. 300 here, 120 there, and pretty soon you’re asking for trouble, it seems
to this armchair commodity trader, safely embedded in faraway, summery London.
We’ve come a long way from sending in Robert Culp and Bill Cosby, tennis
rackets and all.
Exclusive: U.S. discloses secret Somalia military presence, up to 120 troops
By Phil
Stewart WASHINGTON
(Reuters) - U.S. military
advisors have secretly operated in Somalia since around 2007 and Washington
plans to deepen its security assistance to help the country fend off threats by
Islamist militant group al Shabaab, U.S. officials said.
The comments are the first
detailed public acknowledgement of a U.S. military presence in Somalia dating
back since the U.S. administration of George W. Bush and add to other signs of
a deepening U.S. commitment to Somalia's government, which the Obama administration
recognized last year.
The deployments, consisting of up
to 120 troops on the ground, go beyond the Pentagon's January announcement that
it had sent a handful of advisors in October. That was seen at the time as the
first assignment of U.S. troops to Somalia since 1993 when two U.S. helicopters
were shot down and 18 American troops killed in the "Black Hawk Down"
disaster.
The plans to further expand U.S.
military assistance coincide with increasing efforts by the Somali government
and African Union peacekeepers to counter a bloody seven-year insurgent
campaign by the al Qaeda-linked al Shabaab to impose strict Islamic law inside
Somalia.
Those U.S. plans include greater
military engagement and new funds for training and assistance for the Somali
National Army (SNA), after years of working with the African Union Mission in
Somalia, or AMISOM, which has about 22,000 troops in the country from Uganda,
Kenya, Sierra Leone, Burundi, Djibouti and Ethiopia.
"What you’ll see with this
upcoming fiscal year is the beginning of engagement with the SNA proper,"
said a U.S. defense official, who declined to be identified. The next fiscal
year starts in October.
An Obama administration official
told Reuters there were currently up to 120 U.S. military personnel on the ground
throughout Somalia and described them as trainers and advisors.
More
We end for the day with China. With the USA’s cat
mired in Afghanistan, burned in the Ukraine and about to revisit the sands of
Mesopotamia or lose them forever to a Caliphate, Kurdistan, and Greater Iran,
China’s mouse has a free run in Southeast Asia. The Goldmanite’s are still bullish
on China. “God’s work” involves going long China it seems.
“There are some bored foreigners,
with full stomachs, who have nothing better to do than point fingers at us
[China]. First, China doesn’t export revolution; second, China doesn’t export
hunger and poverty; third, China doesn’t come and cause you headaches, what
more is there to be said?”
President Xi Jinping
China Seeks Great Power Status After Sea Retreat
Jul 2, 2014 10:00 PM GMT
Admiral Zheng He is everywhere in China these days, even though he died
almost 600 years ago. The government is promoting him to remind its people --
and Asia
-- that China’s destiny is to be a great naval power. Almost a century before Christopher Columbus discovered America, Zheng in 1405 embarked on a series of voyages with ships of unrivaled size and technical prowess, reaching as far as India and Africa.
The expeditions are in the spotlight in official comments and state media as China lays claim to about 90 percent of the South China Sea and President Xi Jinping seeks to revive China’s maritime pride. In doing so he risks setting up confrontations with Southeast Asian neighbors and the U.S., whose navy has patrolled the region since World War II. Geopolitical dominance of the South China Sea would give China control of one of the world’s most economically and politically strategic areas.
“The Chinese believe they have the right to be a great power,” said Richard Bitzinger, a senior fellow at the S. Rajaratnam School of International Studies in Singapore. “What we are seeing is a hardening of China’s stance about its place in the world.”
----“China’s ultimate long-term goal is to obtain parity with U.S. naval capacity in the Pacific,” said Willy Wo-Lap Lam, adjunct professor at the Centre for China Studies at the Chinese University of Hong Kong. “This is a long-term proposition. At this stage the Chinese understand they don’t have the capacity to take on the U.S. head-on.”
Sensing the U.S. is distracted by foreign policy challenges in the Middle East and Ukraine, China has been ratcheting up pressure on its neighbors, Lam said. It seized control of the Scarborough Shoal from the Philippines in 2012 as Chinese ships “shooed away” their rivals
More
Goldman’s Buy-China Call Has History on Its Side
Jul 3,
2014 2:53 AM GMT
Chinese stock bulls, battered by the world’s worst first-half losses, now
have history on their side. While this year’s 3.5 percent drop in the Hang Seng China Enterprises Index (HSCEI) thwarted optimistic forecasts by Goldman Sachs Group Inc. and Morgan Stanley, the second half has proven a much better time to buy during the past decade. The gauge of Chinese shares traded in Hong Kong rose an average 12 percent from July to December, versus a 1.1 percent gain in the first six months.
China’s stock market tends to rally in the second half as the ruling Communist Party takes steps to meet its economic expansion targets, according to RBC Investment Management (Asia) Ltd. Premier Li Keqiang said last month authorities will “ensure” a minimum growth rate of 7.5 percent, while the government has already eased lending restrictions and accelerated state spending plans to counter a property-market slump. Goldman Sachs, Morgan Stanley and Citigroup Inc. are all sticking with forecasts for equity gains.
“We expect these Chinese indices to rally in the second half,” Jonathan Garner, the chief Asia and emerging-market strategist at Morgan Stanley in Hong Kong, said by phone yesterday. Monetary easing and government spending will “help investors’ concerns on a hard landing for the property sector and the banking system.”
More
“Call
it the Goldman Sachs test. If this is something Goldman would do to its
clients, don't do it."
Felix
Salmon.
At the Comex silver depositories Wednesday final figures were: Registered 58.52
Moz, Eligible 117.71 Moz, Total 176.23 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, the usual suspects again. Great vampire
squids and bent banksters. We all know what comes next, the demise of tulip-mania.
We just don’t yet know when or what the trigger will be."The paper standard is self-destructive."
Hans F. Sennholz
Bubble Finance At Work: How The Share Repurchase Mania Is Gutting Growth And Leaving Financial Wrecks Like Radio Shack
by David Stockman •
Janet Yellen is a chatterbox of
numbers, but most of them are “noise”. And that’s her term.
Yet here is a profoundly
important set of numbers that you haven’t heard boo about from Yellen and her
mad money printers. To wit, during the “difficult” economic times since the
financial crisis began gathering force in Q1 2008, the S&P 500
companies have distributed $3.8 trillion in stock buybacks and
dividends out of just $4 trillion in cumulative net income. That’s right,
95 cents of every dollar they earned—including the huge gains from
restructurings, downsizings and job terminations—was flushed right back into
the Wall Street casino.
Self-evidently, the corporate
form of business organization is designed such that some considerable
portion of net earnings should be returned to their owners each year.
But a 95% rate of distribution is a giant aberration. Were this outcome to
occur on the undisturbed free market, for example, it would signal an
economy that is dead in the water and that participating companies
face a dearth of opportunities to reinvest profits in future growth.
Needless to say, that is the
opposite of the “growth” and “escape velocity” story that
currently excites stock market punters, and is wildly inconsistent with present
capitalization rates in the stock market. That is, in a world of
permanent zero growth and nearly 100% earnings distribution, the
S&P 500′s current 19X PE on reported earnings would be wildly too high. The
more appropriate PE would be in high single digits.
So the $3.8 trillion of dividends
and buybacks since Q1 2008 reflects not the natural economics of the
market at work, but the artificial regime of monetary central planning and the
tax-advantaged treatment of corporate debt. Corporations are eating their seed
corn because boards and CEO’s function in a Fed-created financial casino where
they are massively incentivized to feed the fast money beast with ever larger
share buyback programs in order to shrink the float and goose per share earnings.
Doing so generates plump stock option gains, and failure to do so will bring on
the black plague of shareholder “activists” agitating for big stock buybacks
with borrowed money, and a new CEO and board, too.
Moreover, this pattern is owing
to the fact that the Greenspan/Bernanke/Yellen “put” under the stock indices
has destroyed two-way markets and the natural short interest that arises in any
honest securities market. Accordingly, “downside insurance” against a decline
in the broad market has become dirt cheap—as currently reflected in rock bottom
VIX levels—-and has therefore enabled Wall Street gamblers to chase momentum
plays at will. Stated differently, the momentum chasing hedge funds which drive
the corporate buyback mania would not be nearly as profitable—-or massively
sized—- if the Fed were not effectively subsidizing their downside hedges.
----Just prior to the financial crisis in Q1 2008, for example, share buybacks and dividends among the S&P 500 companies amounted to 130% of net income—-a distribution rate which plunged to just 65% during the dark days of Q1 2009.
But now we are off the races once
again. The distribution rate reached 88% in CY 2013 and came in at
nearly 110% in Q1 2014. In short, as financial markets reach their Fed induced
bubble peaks, companies spend all they earn and all they can borrow
chasing their stock prices ever higher. Indeed, during the most recent
quarters, share repurchase programs have been the marginal bid which has
propelled the stock indices to their current nosebleed heights.
More
"Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future."
Oakley R. Bramble
The monthly Coppock Indicators finished June
DJIA: +169 Down. NASDAQ: +332 Down. SP500: +241 Down. The Fed’s final bubble still grows,
but …..
No comments:
Post a Comment