Baltic Dry Index. 751 -04
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"
Kenneth J. Gerbino
“You will be home before the leaves fall from the
trees,” said Kaiser Bill as he backed up Austria in starting “the war to end
all wars” one hundred years ago this week. He was wrong of course. The survivors
returned defeated and ruined a little over four years later. Caesar Billy
himself was deposed into obscure exile in Holland shortly before Germany’s
crushed defeated army was pushed back
into Germany. So it is in this spirit that we proudly announce this morning
that Europe’s banks are “fixed” once again. Portugal’s Holy Spirit bank has
been rescued by Portugal’s central bank, to once again set out to do “God’s
work.” Of course up until its collapse in still unexplained dodgy
circumstances, no one knew that there was anything wrong at Espirito Santo at
all. Welcome to the EUSSR 2014.
Portugal Announces $6.6 Billion Banco Espirito Santo Rescue
Aug 4,
2014 1:43 AM GMT
Portugal’s central bank
took control of Banco Espirito Santo SA, once the country’s largest lender by
market value, in a 4.9 billion-euro ($6.6 billion) bailout that will leave
junior bondholders with losses. The Bank of Portugal’s Resolution Fund will move Banco Espirito Santo’s deposit-taking operations and most of its assets to a new company, Novo Banco, which it will own outright. The fund will finance the rescue with a Treasury loan to be repaid by Novo Banco’s eventual sale. Espirito Santo shareholders and junior bondholders will be left with the most “problematic” assets, including loans to other parts of the Espirito Santo Group and the lender’s stake in its Angolan operation, according to a central bank statement yesterday.
“Shareholders, subordinated debt holders as well as board members or former board members directly involved in the more recent events, and not the taxpayers, will be called to shoulder the losses incurred by a banking business they failed to adequately oversee,” the Finance Ministry said in a statement.
Banco
Espirito Santo has been forced to take public money after regulators uncovered
potential losses on loans to other companies tied to Portugal’s Espirito Santo
family and ordered the lender to raise capital. Bank of Portugal Governor
Carlos Costa had sought to find private investors to inject the cash, and said
government funds would only be a last resort. The Portuguese
government has about 6.4 billion euros remaining from its European
Union-led bailout in 2011 to fund the capital injection.
Shares
of the lender plunged 73 percent in Lisbon last week to 12 euro cents, for a
market value of 675 million euros, before the stock was suspended on Aug. 1.
Banco Espirito Santo’s 750 million euros of 7.125 percent dated subordinated
notes, part of its Tier 2 capital, were at 35.8 cents on the euro on Aug. 1 and
its more-junior undated hybrid Tier 1 bonds were at 30 cents on the euro, down
from 60 cents on July 30.
More
America is fixed too, thanks to some dodgy
accounting rules changes. Welcome to the USA 2014.
Half-Trillion-Dollar Exodus Magnifying U.S. Bill Shortage
Aug 4, 2014 5:22 AM GMT
One of the biggest winners in the push to make money-market
funds safer for investors is turning out to be none other than the U.S.
government. Rules adopted by regulators last month will require money funds that invest in riskier assets to abandon their traditional $1 share-price floor and disclose daily changes in value. For companies that use the funds like bank accounts, the prospect of prices falling below $1 may prompt them to shift their cash into the shortest-term Treasuries, creating as much as $500 billion of demand in two years, according to Bank of America Corp.
Boeing Co., the world’s largest maker of planes, and the state of Maryland are already looking to make the switch to avoid the possibility of any potential losses. With the $1.39 trillion U.S. bill market accounting for the smallest share of Treasuries in six decades, the extra demand may help the world’s largest debtor nation contain its own funding costs as the Federal Reserve moves to raise interest rates.
“Whether investors move into government institutional money-market funds or just buy securities themselves, there will be a large demand” for short-dated debt, Jim Lee, head of U.S. derivatives strategy at Royal Bank of Scotland Group Plc’s capital markets unit in Stamford, Connecticut, said in a telephone interview on July 28. “That will lower yields.”
He predicts investors may shift as much as $350 billion to money-market funds that invest only in government debt.
During the past five years, America has enjoyed some of the lowest financing costs in its history as the Fed held its benchmark rate close to zero and bought trillions of dollars in bonds to restore demand after the credit crisis.
Based on prevailing Treasury bill rates, it costs the U.S. just 0.02 percent to borrow for three months as of 1:13 p.m. today in Tokyo. In the five decades prior to 2008, the average was more than 5 percent.
Now, with traders pricing in a 58 percent chance the Fed will raise its overnight rate by July, speculation is building that borrowing costs are bound to increase. That’s made finding buyers for the nation’s debt securities even more important.
The sweeping rule changes in the money-market fund industry may help provide that demand.
More
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."
Daniel Webster
At the Comex silver depositories Friday final figures were: Registered 60.30 Moz,
Eligible 115.01 Moz, Total 175.31 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
This time it’s different, posits David Stockman.
Accounting rule changes and smoke and mirror illusions or not, this time round
the Fed has run into “peak debt.” In the final act of the Great Nixonian Error
of fiat money, we are about to meet up with the four horsemen of financial apocalypse.
"The gold standard sooner or later will return with
the force and inevitability of natural law, for it is the money of freedom and
honesty."
Hans F. Sennholz
Don’t Buy This Dip: The Fed Is Not Your Friend
by David Stockman •
During the last 64 months “buying
the dips” has been a fabulously successful proposition. As shown in the
sizzling graph of the NASDAQ 100 below, at it recent peak just under 4,000
this index of the high-growth, big cap non-financials stood at an
astonishing 3.5X its March 2009 low. Moreover, during that 64 month
period, there were but five minor market corrections—-the three
largest reflecting just a 7-8% dip from the previous interim high. And as the
index closed upon its current nosebleed heights, the dips became increasingly
shallower, meaning that the reward for buying setbacks came early and often.
So yesterday’s 2%
dip will undoubtedly be construed as still another buying
opportunity by the well-trained seals and computerized algos which populate the
Wall Street casino. But that could be a fatal mistake for one overpowering
reason: The radical monetary policy experiment behind this parabolic graph
is in the final stages of its appointed path toward self-destruction.
In
fact, this soaring index reflects the most artificial,
unsustainable and dangerous Fed created financial bubble ever.
That’s because its was the untoward product of a completely
busted monetary mechanism. What has happened is that
the Fed’s historic credit expansion channel of monetary transmission has
been frozen shut ever since day one of the massive Bernanke monetary expansion
which began in August 2007, but went into warp-drive in the weeks after the
Lehman event a year later.
Yet this madcap money printing
campaign was a drastic error because it failed to account
for the immense roadblock to traditional monetary stimulus that had
been built up over the last several decades—namely, “peak debt” in the
household and business sector. This condition means that monetary easing and
drastic interest rate cuts have not elicited a surge of consumer borrowing and
business capital spending and hiring as during past business cycle
recoveries.
Instead,
the entire tsunami of monetary expansion has flowed into the Wall
Street gambling channel, inflating drastically every asset class that could be
traded, leveraged or hypothecated. Stated differently, 68 months of zero
interest rates had virtually no impact outside the the canyons of Wall
Street. But inside the casino, they provided virtually free money for the carry
trades, causing an endless bid for leveragable and optionable financial assets.
But now that the monetary flood
is cresting, financial asset values hang in mid-air like Wile E. Coyote.
Stranded there, they are nakedly exposed to market discovery any
moment now that the real economy and sustainable corporate earnings dwell in a
region far below.
More
"The
international monetary order is more precarious by far today than it was in
1929. Then, gold was international money, incorruptible, unmanageable, and
unchangeable. Today, the U.S. dollar serves as the international medium of exchange,
managed by Washington politicians and Federal Reserve officials, manipulated
from day to day, and serving political goals and ambitions. This difference
alone sounds the alarm to all perceptive observers."
Hans F. Sennholz
The monthly Coppock Indicators finished July.
DJIA: +157 Down. NASDAQ: +318 Down. SP500: +232 Down. The Fed’s final bubble has taken on a
very scary wobble, but this is nothing compared to the return of real interest
rates at some point ahead.
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