Baltic Dry Index. 1147 +28
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."
Antony C. Sutton
It is bunker time once again. Time to have no
leveraged bets in the markets and to be safely invested in cash and fully paid
up precious metals, safely held outside of the larcenous reach of Uncle Scam
and John Bull. China’s wobble now looks like the introduction to the much
feared hard landing, while a political fight is looming over the future of Hong
Kong. In Europe, continental Europe has decided to follow Germany’s Pied Piper
into imposing “hard” sanctions on Russia in one week, unless Russia grovels
before Mrs Merkel during the week. Hell will freeze over first. Continental
Europe is committed to economic suicide in a week, or to a massive loss of face
in a grovelling U-turn.
China Loses Growth Momentum as Manufacturing Pulls Back
Sep 1, 2014 5:36 AM GMT
China’s manufacturing
slowed more than estimated last month, joining weaker-than-anticipated credit,
production and investment data in suggesting the economy is losing momentum. The government’s Purchasing Managers’ Index (MXAP) was at 51.1 for August, missing the median 51.2 estimate in a Bloomberg survey. The final reading of a separate manufacturing gauge from HSBC Holdings Plc and Markit Economics was 50.2. Both readings fell from 51.7 in July and remain above 50, indicating expansion.
A
pullback in manufacturing, coming as the property market slumps, adds pressure
on the government to step up efforts to meet its expansion target of 7.5
percent this year. More stimulus measures will be announced in the next few
weeks, said Lu Ting, Bank of America Corp.’s Hong Kong-based head of Greater
China economics.
More
China’s Property Slump Leads to Record Loans to Builders
Sep 1,
2014 4:23 AM GMT
Cash-strapped Chinese developers
are borrowing a record amount in the offshore loan market this year, adding to
the highest debt loads since 2005.
Homebuilders in the world’s
second-largest economy got $5.9 billion from foreign banks, up 39 percent from
the same period last year, according to data compiled by Bloomberg. Builder
debt has soared to 128 percent of equity, the highest since 2005, according to
a Bloomberg Intelligence gauge of 84 companies. New home prices fell in July in
almost all cities the government tracks and developers are missing sales
targets.
“Higher leverage on the balance
sheet will give developers a higher financial burden,” said Agnes Wong, credit
strategist at Nomura Holdings Inc. in Hong Kong. “That means that if presales
are not going as quick as they expect it can translate into trouble more easily
than before.”
More
Hong Kong Group Vows Fight Over China ‘Puppet’ Poll Plan
Sep 1,
2014 2:51 AM GMT
Protesters in Hong Kong vowed to start an era of civil disobedience after
China ruled that candidates for the city’s first planned popular election must
be screened, dashing demands from democracy activists. Opposition lawmakers in Hong Kong vowed to block the passage of the electoral bill, while activist group
Occupy Central With Love and Peace said it will stage a mass occupation of Hong Kong’s financial district, without specifying a date
The
ruling angered pro-democracy campaigners because it gives the government in
Beijing an effective veto over anyone not viewed as friendly to the Communist
Party. The division is set to bring chaos to one of the world’s financial
capitals, where HSBC Holdings Plc has its Asian offices, while China has also
threatened to scrap the 2017 election if there’s no agreement.
More
In the rush to World War Three over the Ukraine,
both the EU and President Putin upped the ante over the weekend. Suicide for
continental Europe, of course.
"Never
believe anything in politics until it
has been officially denied."
Otto von Bismarck
Ukraine Vessels Attacked as New EU Russia Sanctions Loom
Aug 31, 2014 10:01 PM GMT
Pro-Russian rebels attacked two Ukrainian coast-guard vessels for the first
time, just hours after European Union governments agreed to impose new
sanctions on Russia
if the conflict worsens. Fighting in southeast Ukraine continued yesterday and the situation there remains “tense,” according to military officials in Kiev. While EU leaders disagreed about possible military assistance to Ukraine, they gave the European Commission a week to deliver proposals for sanctions that may target Russia’s energy and finance industries.
Russian President Vladimir Putin said talks on the “statehood” status of southeast Ukraine are needed to resolve the crisis, according to a Channel One TV taped interview aired yesterday. His spokesman Dmitry Peskov later told reporters in Chelyabinsk, Russia, that Putin isn’t seeking “statehood” for the region.
“We must strive toward implementing the plan we agreed upon,” Putin said. “We must immediately commence substantive talks and not only on technical issues, but also on the political organization of society and the statehood status of southeast Ukraine in order to serve the interests of people living there.”
Putin’s statehood statement isn’t surprising and is “in line with Moscow’s plans of creating an autonomous region in eastern Ukraine that potentially will have a right to self-determination, which could then be a leverage on Ukraine, particularly in preventing the country from joining NATO,” Lilit Gevorgyan, senior analyst at IHS Global Insight in London, said by e-mail yesterday.
More
In other news, a new front is opening up in the
Caliphate. If Israel gets actively involved against IS on the side of President
Assad, my guess is that IS will try to extend the front into Europe and America
later in the year.
Israel Military Shoots Down Unmanned Aircraft Over Golan
Aug 31,
2014 7:12 PM GMT
The Israeli military said it shot down an unmanned aircraft above the
Israeli-held section of the Golan Heights, a plateau that’s become more volatile with
Syrian rebels’ gains and confrontations with United Nations peacekeepers. Hours before a Patriot missile brought down the aircraft, Israeli Prime Minister Benjamin Netanyahu warned that his country was ready to combat threats to its security on all fronts, including the Golan. At Israel’s first cabinet meeting since an Aug. 26 truce ending 50 days of Gaza Strip fighting, the prime minister said he hoped “the quiet that has been restored will continue to prevail for a long time.”
“But we are ready for any scenario, not just on that front, but also other fronts, including the Golan,” he said. Israel captured the southern section of the plateau from Syria in the 1967 Mideast war and annexed it 14 years later in a move that isn’t internationally recognized.
Syrian rebel advances near Israel’s northern frontier have unsettled the area, which has been largely quiet since Israel and Syria last warred four decades ago. Last week, Islamist groups linked to al-Qaeda, including the al-Nusra Front, took control of the Syrian side of the Quneitra crossing into the Israel-held section of the Golan, according to the U.K.-based Syrian Observatory for Human Rights.
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
At the Comex silver depositories Friday final figures were: Registered 63.13 Moz,
Eligible 116.16 Moz, Total 179.29 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, it’s the IPO Squids again, Friends of
Greenspan 2.0.“Call it the Goldman Sachs test. If this is something Goldman [your firm here] would do to its clients, don't do it."
Felix
Salmon.
Pump And Dump VC Style: Kleiner Perkins’ Gambit To Shear The IPO Sheep
by David Stockman • August 29, 2014
That was quick! Last
November Snapchat was valued at $2 billion in the private VC market; by Q1 that
had risen to $7 billion; and yesterday it soared to $10 billion. Gaining $8
billion in market value in just nine months is quite a feat under any
circumstance—-but that’s especially notable if you’re are a company with
no profits, no revenues and no business model.
And, yes, that’s not to mention
the “product”, either. Apparently, Snapchat’s 100 million teenage
and college users mostly swap pics of their private parts which
vanish after 15 seconds—–or so they think. In that respect, Snapchat’s
business challenge may not be lack of “demand”, but whether its exhibitionist
“customers” will be copasetic with sharing their 15 seconds of fame with
advertisers.
Time will tell, unfortunately.
In the meantime, however, its evident that Snapchat’s spectacular
valuation rise is not about how to discount the potential value stream
from monetizing dirty pictures. Instead, it reflects the crazy dynamics of late
stage financial bubbles. And on that score, Wolf Richter has hit the nail
squarely on the head, as usual.
As he explains in today’s post,
Snapchat’s spectacular valuation run-up is just a new and more sophisticated
form of “pump and dump”. In this instance, the venture capital firms involved
have apparently invested trivial amounts of chump change in the two recent
funding rounds in order to peg dramatically higher paper valuations in
preparation for an imminent IPO. In numeric terms they have invested less
than $30 million since last November, meaning that they have been able to
leverage an $8 billion valuation gain at a ratio of 266:1.
By strategically deploying less
than $30 million, KPCB, and DST Global before it, have ratcheted up Snapchat’s
valuation from $2 billion to $10 billion. With the stroke of a pen, in a deal
negotiated behind closed doors, they have created an additional $8 billion in
“wealth” that is now percolating through the minds of employees with stock
options and through the books of the early investment funds.
To be sure, Wall Street has
sponsored such market-rigging ploys since time immemorial. However, the true
evil of rampant central bank money printing is that it vastly enables and
amplifies such speculative ventures, while at the same time eviscerating the
natural checks and balances against speculative manias which are
embedded in honest financial markets.
Specifically, zero money market
rates (ZIRP) for 68 months running have unleashed carry trade gambling in
the financial markets like never before. That’s because professional Wall
Street speculators can acquire risk assets and “fund” them on high
leverage— through margin accounts, options trades or specifically crafted
“structured finance” deals from their prime brokers—- at tiny interest rates.
The resulting “spread” is bubblicious—especially when the Fed’s implicit “put”
under the stock averages fuels a rambunctious “buy the dips” psychology
among traders.
Under those circumstances—which
are rampant at the moment—a gambler’s wildest dream comes true. The
carry cost side of a leveraged gamble is pinned at close to zero by the solemn
commitment of the central bank, while the asset value side of the
trade ratchets ever higher owing to the endless bid of the dip buyers.
And its actually even better. The
obvious effect of the Fed’s incessant market coddling since at least the days
of the LTCM bailout in September 1998, but especially since Bernanke went
all-in September 2008, is that the natural short interest in the stock market
has been punished, bloodied, and destroyed. Consequently, downside
insurance on speculative portfolios (i.e. puts on the S&P 500) is dirt
cheap, meaning aggressive traders can protect themselves against an unexpected
(and unlikely) plunge in the broad market while barely denting their
gains from high flying momo stocks in favored sectors like social
media or whatever happens to be the flavor of the week.
Needless to say, cheap
downside insurance only enlarges and strengthens the bid for high
flyers—-a dynamic that works wonders in the IPO market,
especially. Accordingly, lunatic valuations have once again flourished in
the new issues market as if its 1999-2000 all over again.
And like then, the resulting
devil’s workshop environment incentivizes the smart money to concoct schemes to
exploit the bubble—like yesterday’s 266:1 leveraging of Snapchat’s valuation.
That this will end in tears for the “slow money” IPO sheep who show up for the
shearing, goes without saying.
What needs remark, however, is
the enormous damage that these kinds of financial deformations and
distortions do to the real economy and the capitalist machinery of invention
and enterprise. By all the historic evidence, Kleiner Perkins has been one of
the greatest incubators of technological progress and business
innovation in modern times. Surely it has better things to do, therefore,
than run a crude 1920s style pump and dump scheme that will contribute
nothing to society except painful losses for the retail investors who take the
bait.
So here’s the thing. Free central
bank money corrupts free markets absolutely—-that should be more than evident
by now. But owing to the dense economic fog on her
Keynesian windshield, Janet Yellen and her band on money printers in the
Eccles Building remain clueless as to the monumental corruption that
is being injected into financial markets by Fed policy.
Would
that Yellen should at least read Wolf Richter’s excellent post
on the present moment’s most spectacular example of that. Better
still, perhaps a trip back to San Francisco where bubble opulence
ricochets thru the entire economy would be in order. She might discover that
the median housing price has soared to more than $1 million; and that none
of the inhabitants of the “labor market” that she is so vainly attempting to
revive even qualifies for a standard mortgage.
More
One
of the queries Quakers are asked to consider, is: "Do you maintain strict
integrity in your business transactions and in your relations with individuals
and organizations? Are you personally scrupulous and responsible in the use of
money entrusted to you, and are you careful not to defraud the public
revenue?"
Probably
why there a no Quakers on Wall Street.
The monthly Coppock Indicators finished Aug.
DJIA: +152 Down. NASDAQ: +312 Down. SP500: +231 Down.
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