Baltic Dry Index. 755 -27
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
We are deep into the Fed's final bubble, which
continues to inflate aided by all the central bankster voodoo economics of
ZIRP, QE Forever, and TLTRO. In a quick illustration of all that is wrong in
the casino, in the real world the Baltic Dry shipping Index is collapsing
again, approaching its December 2008 crisis low of 663. Historically, the BDI
tends to be volatile but generally hits its low at the start of the year in
January or February. To be collapsing in July suggests to this old dinosaur
commodities trader, that something is going very wrong in international trade.
With one hundred dollar oil, are any shipping companies profitable with a BDI
down in the Great Recession basement? It all adds to my scepticism of yesterday’s
China GDP figures.
When our new lawless, central bankster casino
gambling fuelled world returns to reality, the crash of 2007-2009, is all too
likely to look like a child’s picnic.
China and the rest of the world have all borrowed heavily from tomorrow’s
future to invest in today’s Tulip mania.
“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
Bubble Paranoia Setting in as S&P 500 Surge Stirs Angst
Jul 17,
2014 12:35 AM GMT
Two years of uninterrupted gains in U.S.
stocks are sowing anxiety among financial professionals, with three in five
saying the market is on the verge of a bubble or already in one, the Bloomberg
Global Poll found. Forty-seven percent of those surveyed said the equity market is close to unsustainable levels while 14 percent already saw a bubble, according to a quarterly poll of 562 investors, analysts and traders who are Bloomberg subscribers. Almost a third of respondents called the market for lower-rated corporate debt overheated and most said stock swings will increase within six months, the July 15-16 poll showed.
With biotechnology stocks trading at more than 500 times earnings, mega-deals resurfacing and bond sales at a record, concern prices are too high is growing amid a rally that has pushed the Standard & Poor’s 500 Index almost 30 percent above its peak in 2007. The view isn’t shared by the Federal Reserve, which said this week that while valuations are stretched in smaller biotechnology and social media companies, asset prices in general are in line with historical levels.
----More than $15 trillion has been added to U.S. equity values and the S&P 500 is up 193 percent since the bull market began in March 2009. The benchmark gauge trades for 18.1 times profit, the highest level since 2010, according to data compiled by Bloomberg.
Equity valuations are not excessive compared to the dot-com bubble of the 1990s, according to Doug Ramsey, chief investment officer at Leuthold Group LLC. Using the average of six metrics such as price to earnings and sales, market valuations today correspond to levels in 1996, according to a study published by Ramsey last month.
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China Rallying for All Wrong Reasons to Top-Rated Analyst
Jul 17, 2014 5:48 AM GMT
The more China
does to boost economic growth, the more bearish David Cui gets on the nation’s
stock market. The Bank of America Corp. (BAC) strategist, ranked No. 1 by Institutional Investor magazine, says the state spending and monetary stimulus that drove a 14 percent rally in the Hang Seng China Enterprises Index (HSCEI) from this year’s low in March are only making equities less appealing as leverage rises and free cash flow dwindles. He predicts the gauge will drop to 9,600 by year-end, or 8.4 percent below yesterday’s close.
Cui’s pessimistic outlook for the largest emerging market puts him at odds with bulls at some of the biggest banks and money-management firms, including Goldman Sachs Group Inc. and BlackRock Inc. He says policy makers’ unwillingness to endure the “short-term pain” of slower growth, needed to cut debt and shift the economy toward a consumption-based model, will prevent a sustainable rally.
“Given that growth is still being driven by the usual factors, it means the core issue is getting worse as people are building up debt,” Cui said in a phone interview on July 14. “The issue is whether this growth is good quality and sustainable. My belief is that it’s not.”
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China Finds Debt Addiction Hard to Break in Growth Quest
Jul 17, 2014 5:28 AM GMT
China’s
leaders are having trouble breaking their addiction to debt-fueled investment. Outstanding credit rose to 206.3 percent of gross domestic product last quarter from 202.1 percent in January-to-March, according to data compiled by Bloomberg from government releases the past two days. Investment in fixed assets, a typical outlet for loans, accelerated in June for the first time since August.
----“There are
reasons to continue wondering how this is going to end,” said Louis Kuijs,
Royal Bank of Scotland Group Plc’s chief Greater China economist in Hong Kong,
who formerly worked at the World Bank. “Clearly they have made the decision
that growth is still so important and we notice that they cannot meet their growth
target at the moment without adding on more credit.”
More
Desperate Times: Chinese City Leverages Party Paper to Sell Houses
Jul 17, 2014
One joke that has made the rounds
among some economists in recent years holds that the Chinese government is not
a government at all, but in fact the world’s biggest property developer. After
all, were it not for revenues from land sales, local government budgets across
the country would likely collapse like hundreds of little Lehman Brothers.
That notion of Beijing as a
regime of real estate salesman was reinforced this week after the Communist
Party’s local flagship newspaper in an eastern Chinese city published a
front-page article urging people to buy real estate in one of the country’s
best-known ghost towns.
“Good Opportunity to Buy Houses in Our City” proclaimed the headline emblazoned across the top of the Tuesday edition of the Changzhou Daily.
The “article” below (in Chinese) argued that despite recent weakness in Changzhou’s property market, there’s limited downside for prices and it’s “a good time to purchase real estate.”
An ancient city in the affluent Yangtze River Delta area that also includes Shanghai, Changzhou boasts a population of 4.7 million people, a struggling solar energy industry, a dinossaur theme park and a robust dried radish industry. But after years of high-octane development fed by rising property prices, the city is probably best known as an example of China’s so-called “ghost city” phenomenon.
Like dozens of similar third- and fourth-tier cities that overbuilt when the property market was booming in 2009 and 2010, Changzhou had a grand vision for itself. It blocked out a section for higher-end housing and started building a subway in anticipation of transforming itself into a producer of advanced materials and high-tech goods. But with the market cooling and the more alluring lights of Shanghai beckoning the moneyed class, Changzhou’s banks of luxury houses remain largely unoccupied.
More
What to Fear If China Crashes
Jul 16, 2014 6:03 PM EDT By William
Pesek
Few moments in modern financial history were scarier than the week of Sept.
15, 2008, when first Lehman
Brothers and then American International Group collapsed. Who could
forget the cratering stock markets, panicky bailout negotiations, rampant
foreclosures, depressing job losses and decimated retirement accounts -- not to
mention the discouraging recovery since then?Yet a Chinese crash might make 2008 look like a garden party. As the risks of one increase, it's worth exploring how it might look. After all, China is now the world's biggest trading nation, the second-biggest economy and holder of some $4 trillion of foreign-currency reserves. If China does experience a true credit crisis, it would be felt around the world.
"The example of how the global financial crisis began in one poorly-understood financial market and spread dramatically from there illustrates the capacity for misjudging contagion risk," Adam Slater wrote in a July 14 Oxford Economics report.
Lehman and AIG, remember, were just two financial firms out of dozens. Opaque dealings and off-balance-sheet investment vehicles made it virtually impossible even for the managers of those companies to understand their vulnerabilities -- and those of the broader financial system. The term "shadow banking system" soon became shorthand for potential instability and contagion risk in world markets. Well, China is that and more.
More
Money,
again, has often been a cause of the delusion of the multitudes. Sober nations
have all at once become desperate gamblers, and risked almost their existence
upon the turn of a piece of paper.
Charles
Mackay. Extraordinary Popular Delusions and the Madness of
Crowds
At the Comex silver depositories Wednesday final figures were: Registered 58.17
Moz, Eligible 117.80 Moz, Total 175.97 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
“If there is a 50-50 chance that something can go wrong, then 9 times out of ten it will.”
Paul Harvey. Tulsa, OK.
U.S., EU Escalate Russia Sanctions as Putin Holds Firm
Jul 17, 2014 12:41 AM GMT
The Obama administration, acting in concert with the European Union, imposed
sanctions on Russian banks, energy companies and defense firms in the latest
attempt to punish the country over Ukraine. The U.S. and EU, which say Russia is supporting the rebels in Ukraine, sought to squeeze the country’s $2 trillion economy by limiting access to financing.
Among the companies hit by the U.S. penalties were OAO Rosneft (ROSN), Russia’s largest oil company, natural gas producer OAO Novatek (NVTK), OAO Gazprombank, the country’s third-largest lender, and state economic development lender Vnesheconombank, the U.S. Treasury Department said today.
The EU said it would halt lending for new public-sector projects in Russia by the European Investment Bank, the bloc’s in-house lender, and will use its influence to stop new lending by the European Bank for Reconstruction and Development.
“These sanctions are significant,” U.S. President Barack Obama said today at the White House. “But they are also targeted, designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies.”
At a news conference in Brasilia, Russian President Vladimir Putin called the U.S. sanctions “aggressive policy” and will only end up hurting American companies. The sanctions will lead U.S.-Russia relations to a dead end, he said.
---- Exxon Mobil Corp. (XOM) and Rosneft had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea. In return, Rosneft has the option of buying into Exxon’s portfolio of exploratory projects in the U.S. Gulf of Mexico, west Texas and the Canadian province of Alberta.
Alan Jeffers, an Exxon spokesman, declined to comment on whether the new round of sanctions will disrupt the Texas-based oil producer’s exploration partnership with Moscow-based Rosneft, which produces 5 percent of the world’s oil
More
Hungry U.S. Power Plant Turns to Russia for Coal Shipment
Jul 16, 2014 9:30 PM GMT
When New
Hampshire’s largest utility needed to rebuild coal supplies after
the past frigid winter, it turned to Russia rather than Appalachia in the U.S.
Northeast or Wyoming’s
Powder River Basin. The Doric Victory, a bulk carrier the length of two football fields, transported the fuel almost 4,000 miles (6,436 kilometers) from Riga, Latvia, last month to Public Service of New Hampshire’s Schiller power plant in Portsmouth, a 150-megawatt facility that’s produced electricity since 1952.
Utilities in the U.S. are scrambling for coal, on pace to increase imports 26 percent this year, as railroad bottlenecks slow deliveries and electricity demand climbs with an improving economy. Russia, the world’s third-largest exporter of the fuel, will boost shipments 3.9 percent to 106 million metric tons this year, IHS Energy forecasts, part of President Vladimir Putin’s plan to expand Russia’s role in the global coal market.
“Everyone’s aware that a number of plants have low stockpiles, so you hear Russian coal and they say, ‘Oh wow, people must really be desperate,’” James Stevenson, Houston-based director of North American coal at IHS, said in a July 8 telephone interview.
More
Another cause of monetary disaster lies in the earlier policy at the Fed
itself.
Fed kicks off global dollar squeeze as Janet Yellen turns hawkish
A vast wash of dollars flooded the global financial system when the Fed cut rates near zero and then bought $3.5 trillion of bonds. This may now go into reverse
The US Federal Reserve has begun
to pivot. Monetary tightening is coming sooner than the world expected, with
sober implications for overheated bourses, and for those in Asia, eastern
Europe and Latin America that drank deepest from the draught of dollar
liquidity.
We can expect a blistering dollar
rally, perhaps akin to the early 1980s or the mid-1990s. It is fortuitous that
the BRICS quintet of Brazil, Russia, India, China and South Africa have just
launched their $100bn monetary fund to defend each other's currencies. Some of
them may need it.
America's unemployment rate has
fallen from 7.5pc to 6.1pc in 12 months. The country has been adding 230,000
jobs a month in the first half of this year.
Since
Fed chief Janet Yellen targets jobs above all else, this was bound to force
capitulation by the Fed before long. It happened this week in her testimony to
Congress. "If the labour market continues to improve more quickly than
anticipated, then increases in the federal funds rate likely would occur sooner
and be more rapid than currently envisioned," she said.
This
is a policy shift. Mrs Yellen has admitted that the Fed misjudged the pace of
jobs recovery. The staff did not expect unemployment to fall this low until
late next year. The inflexion point has come 15 months early.
To
some it feels like 2004, when the Greenspan Fed found itself badly behind the
curve, suddenly switching from nonchalance in May to rate rises in June.
"They may have left it too late again: the risk is a reckoning point when
rates rise abruptly," said Jens Nordvig, from Nomura.
More
“Things
don't go wrong, they simply happen.”
The “talking
chair,” with apologies to Anon.
The monthly Coppock Indicators finished June
DJIA: +169 Down. NASDAQ: +332 Down. SP500: +241 Down. The Fed’s final bubble still grows,
but …..
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