Baltic Dry Index. 890 Unch.
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
One
wanders to the left, another to the right. Both are equally in error, but, are
seduced by different delusions.
Horace.
Superficially it’s a tale of boom and bust. Under
QE forever and ZIRP, America and Great Britain boom, under German austerity and
old failed socialism forever, France heads for bust. In reality, the boom has
more to do with a debt fuelled speculative bubble and a seasonal lift from a
very cold winter in North America and a very wet winter in GB. But the bust in
France is all too real, and France is now heading to break the Euro long before
GB gets to vote itself free from the EUSSR.
Below, the latest numbers from America that
accelerated the one way bet in stocks. No matter what the good news, goes the
one way bet, the Fedster’s daren’t stop QE forever entirely, nor raise interest
rates, however tiny the amount. Doing either, the Fed would slam its final stock
market bubble into the wall, and America, GB, China and the BRICs would all
come crashing down. The Fed’s talking
chair is over a barrel, and every last Great Vampire Squid knows it and is
going to fully exploit it. Besides, if it all goes wrong, despite what the
Fedster’s say in public, they will all get bailed out again, and everyone knows
it.
"There
is no reason whatever to fear a crash".
Charles
Mackay. 2 October 1845, Glasgow Argus, on Railway Mania.
Plunging Unemployment Bolsters Case for Earlier Fed Rate Rise
Jul 4, 2014 5:00 AM GMT
A plunge in U.S. unemployment to the lowest level in more than five years
bolsters the case for Federal Reserve officials to raise the main interest rate
earlier than they forecast just three weeks ago. Payrolls surged in June by 288,000 workers and unemployment fell to 6.1 percent, a level that Fed officials didn’t expect to see before the end of the year, a government report showed yesterday. Further job gains would probably prompt the Fed in September to raise its projections for the benchmark interest rate at the end of 2015 and 2016, said Roberto Perli, a partner at Cornerstone Macro LP in Washington.
“If the recent trend in the labor market continues, the next FOMC interest-rate projections should be even higher,” Perli said in a note to clients, referring to the Federal Open Market Committee. (FDTR) “With inflation approaching the 2 percent target and the unemployment rate continuing to decline, the odds that the Fed will lift rates off of zero sooner than the market expects are increasing,” said Perli, former associate director of the Fed’s Division of Monetary Affairs.
More
Payroll Surge Fuels Self-Sustaining U.S. Expansion: Economy
Jul 3, 2014 6:25 PM GMT
Job growth blew past expectations and the unemployment rate fell to the lowest level since before the
financial crisis peaked six years ago, creating a firm foundation for a
stronger U.S. economic expansion. Payrolls rose by 288,000 workers following a 224,000 gain the prior month that was bigger than previously estimated, Labor Department figures showed today in Washington. The 1.39 million increase in employment over the past six months is the biggest over a similar period since early 2006.
Companies such as Ford Motor Co. (F) are adding staff and boosting output to meet improving sales, which in turn will lead to gains in incomes that will spur even more demand. The yield on Treasury securities climbed as the jobs report called into question how much longer Federal Reserve policy makers can keep their benchmark interest rate near zero to nurture the economy.
“We’re
seeing a self-sustaining recovery where production growth leads to job growth,
which leads to consumption growth,” said Robert Stein, deputy chief economist
at First Trust Portfolios LP in Wheaton, Illinois, and
the top forecaster of payrolls the past two years, according to data compiled
by Bloomberg. “With the unemployment rate coming down, the Fed is in a bit of a
bind.”
More
Army of Long-Term Jobless Dwindles as Hiring Accelerates
Jul 3, 2014 4:42 PM GMT
Employers who added 288,000 jobs in June showed they might be taking a more
serious look at resumes from the long-term unemployed, who last month accounted
for the smallest proportion of U.S. jobless ranks in five years. Those out of work 27 weeks or longer made up 32.8 percent of unemployed Americans as the overall unemployment rate dropped to an almost six-year low of 6.1 percent, according to Labor Department data released this morning in Washington.
“You’ll see more and more businesses start to hire the longer-term unemployed and that’s going to put some downward pressure on wages as well,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who was among the most accurate forecasters of the drop in unemployment.
----About half of the drop in unemployment in the past year is due to the decline among the long-term jobless. Overall unemployed fell by 2.27 million, which included 1.24 million of those out of work for 27 weeks or longer.
More
Trade Gap in U.S. Shrinks More Than Forecast on Record Exports
Jul 3, 2014 1:30 PM GMT
The trade deficit in the U.S. narrowed more than forecast in May on record
exports, signaling a pickup in global growth that will boost American
manufacturers. The gap shrank by 5.6 percent, the biggest drop since November, to $44.4 billion from the prior month’s $47 billion, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg survey of 69 economists called for a contraction to $45 billion. Sales to foreign customers climbed 1 percent on growing demand for autos and parts, petroleum products and aircraft engines.
Economic expansions abroad that are gaining traction will probably continue to invigorate demand for American goods. A narrowing deficit would mean trade becomes less of a drag on gross domestic product in the second quarter after the world’s largest economy contracted in the first three months of 2014.
More
Below, the contrarian view. All hell breaks out
later this autumn in crash season, if this view catches on.
Fed May Raise Rates in First Quarter, BlackRock Estimates
Jul 3, 2014 4:24 PM GMT
Stronger-than-forecast jobs growth underlines economic acceleration that may
push the Federal Reserve to raise interest
rates by the first quarter of 2015, BlackRock Inc.’s Rick Rieder said. “The Fed will move faster than people think because the data is extraordinarily compelling,” Rieder, whose company is the world’s biggest money manager, said in an interview on Bloomberg Television’s “Market Makers” with Erik Schatzker. “If the data continues along the runway that it’s at, there’s no reason why it can’t move faster.”
Rieder, New York-based BlackRock’s chief investment officer for fundamental fixed income, spoke after the Labor Department reported U.S. employers added 288,000 workers in June. Economists in a Bloomberg survey estimated a gain of 215,000. The unemployment rate fell to an almost six-year low of 6.1 percent.
“The economy is accelerating; there’s no doubt about it,” Rieder said.
More
In Europe, move over Club Med, here comes France.
Too big to fail or bail, Berlin, you have a problem. Hopefully John Bull can
get out of the EU before continental hell breaks out, although on the present
timetable that appears most unlikely. In an attempt to defer the coming bust,
the ECB’s Great Leader is about to follow a scripts long finessed by the Bank
of Italy. The Germans may be Europe’s paymasters but they are about to get an
Italian currency.
IMF warns of negative spiral in France as recession looms again
France has sunk into an economic malaise and could take years to climb back out
France is on the cusp of a fresh
recession as services contract sharply and the country braces for yet another
round of austerity cuts, with record jobless levels likely to bedevil Francois
Hollande’s presidency for years to come.
Markit’s PMI services gauge for France
fell for the third month to 48.2 in June, pointing to an outright fall in GDP
following zero growth in the first quarter.
The International Monetary Fund
cut its growth forecast this year from 1pc to 0.7pc, warning that there would
be no “appreciable decline” in French unemployment until 2016. “Volatile and
uneven leading indicators point to the risk of a stalled recovery,” it said.
The IMF said public debt should
peak at 95pc of GDP next year but a “growth shock” would push it to 103pc by
2016. The Fund warned of a “negative spiral of low growth and falling
inflation” that is pushing up real borrowing costs and further choking
investment, already dismally weak. Core inflation was 0.3pc in May.
The economic relapse is a
political disaster for Mr Hollande, already the least popular leader in modern
times with a poll rating of 23pc, and reeling from a crushing defeat by the
far-Right Front National in European elections.
The country is being left behind
by Spain and others as they reap the first rewards from supply-side reforms,
although the France’s Socialists grumble that they are merely under-cutting
France with deflationary wage cuts in a 1930s-style race to the bottom that
ultimately benefits nobody.
Mr Hollande is paying the price
for a failed strategy in his first two years in office when he clung to the old
model and relied on tax rises rather than spending cuts to cover austerity
packages. The state sector has risen to 57pc of GDP, suffocating the private
economy.
----The effect of austerity has been to
erode the tax base, leaving the budget deficit stuck at over 4pc of GDP. France
has gained remarkably little from fiscal tightening equal to 5pc of GDP over
the last three years. Undeterred, it is now pushing through extra cuts of €50bn
by 2017 under the new premier Manuel Valls, dubbed the “economic Clemenceau”
for his willingness to endure casualties stoically. The biggest hit will come
next year, raising the risk that economy will once again to fail to achieve
escape velocity.
More
Draghi Says Rates to Stay Low as ECB Prepares New Loans
Jul
3, 2014 7:15 PM GMT
European Central Bank President Mario Draghi
said he’ll keep interest rates low as officials try to revive the economy with
their latest emergency measures. “The key ECB interest rates will remain at present levels for an extended period,” Draghi said at a press conference in Frankfurt after policy makers left borrowing costs unchanged. “The combination of monetary policy measures decided last month has led to a further easing of the monetary policy stance. The monetary operations to take place over the coming months will add to this accommodation and will support bank lending.”
Draghi is pumping cash into the 18-nation currency bloc in an effort to bolster credit supply and boost inflation (ECCPEMUY) that is running at about a quarter of the ECB’s goal. While his comments today added details on benchmarks for linking liquidity injections to real-economy lending, doubts remain over how well the plan will work.
“One of the key questions we had going into this meeting is whether Draghi would take a tougher line on how the banks use the money” the ECB will offer them, said Marchel Alexandrovich, senior European economist at Jefferies International Ltd. in London. “At first glance, the benchmarks set are not particularly challenging.”
Draghi estimated that banks could
take up as much as 1 trillion euros ($1.36 trillion) in two initial tenders and
a series of quarterly auctions under the targeted longer-term refinancing
operations, known as TLTROs.
Details of the program released
today showed that banks will be able to access TLTRO funding that they can hold
for as long as four years if they maintain or increase the size of their loan
portfolio to companies and households. Banks that are deleveraging can get the
funding provided they don’t accelerate the reduction in their loan book through
April 2015, and keep it stable thereafter.
Morehttp://www.bloomberg.com/news/2014-07-03/draghi-says-rates-to-stay-low-as-ecb-prepares-new-loans.html
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 Thursday final figures were: Registered 58.04
Moz, Eligible 117.48 Moz, Total 175.52 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
No crooks, banksters or bent politicians today, as
the USA celebrates Independence Day and its first hurricane of the 2014 season.
Just an observation from a great mathematician who often held some odd views.
Of course my work is very important, where would the world be without it?
“One
of the symptoms of an approaching nervous breakdown is the belief that one’s
work is terribly important.”
Bertrand
Russell, The Conquest of Happiness
Have a great weekend everyone.
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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