Baltic Dry Index. 1049 +11
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“Those who don't know history are destined to repeat it.”
Edmund Burke
We open today with China, and disturbing news from
Hong Kong. Is this just a one off response to bungling by out of touch
apparatchiks in Beijing and Hong Kong, or the start of another reckless US War
Party financed Kiev style coup, shortly to be spread into China proper? Who
benefits from turning China into a second Ukraine? How long before the PLA puts
“boots on the ground” to use President Obama’s words? Stay long gold and
silver.
Taking down China will surely take down us all. If America’s War Party
over reached in the Ukraine, taking on China is madness on steroids. Hong Kong
is supposed to demonstrate to Taiwan why it needs Uncle Scam after all. My
guess is we will not wait very long for a Beijing reaction.
Hong Kong Dollar, Stocks Retreat Amid Protest Crackdown
Sep 29, 2014 5:01 AM GMT
Hong Kong’s stocks fell the most in almost three weeks, the city’s
currency dropped and equity-market volatility surged amid the biggest police
crackdown on protesters since the city returned to Chinese rule. The benchmark Hang Seng Index (HSI) sank 1.8 percent as of 11:33 a.m. in Hong Kong, headed for the biggest loss since Sept. 10, as developers and retailers tumbled. A gauge of stock volatility jumped 17 percent, poised for the steepest surge in seven months. The city’s currency dropped to a six-month low and one-year interest-rate swaps climbed the most in 15 months.
Thousands of pro-democracy protesters remained near government offices in the Admiralty district after weekend clashes with police, who fired tear gas and pepper spray. While demonstrators still blocked one of the main roads into the central business area, calm returned as people returned to work.
“In terms of sentiment the market is likely to remain very cautious,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management, which oversees about $1.7 trillion worldwide. “This is a very unusual situation for Hong Kong. In the short term there’s going to be shock to the markets but it’s still more important to look at aspects such as fundamentals and valuations.”
Rallies that sprang up in the shopping neighborhoods of Causeway Bay and Mong Kok after police used tear gas on the crowds yesterday were dwindling. Even as the streets calmed, workers said they would go on strike, and protesters pledged to return.
The showdown adds to concerns about falling retail sales and rising U.S. interest rates that fueled a 6.5 percent drop in the Hang Seng Index from this year’s high on Sept. 3 through last week.
More
Alibaba Slumps in First Week as Short Sellers Enter Trade
Sep 28, 2014 5:00 PM GMT
Day one for shareholders of Alibaba Group Holding Ltd (BABA) was great. Week one
proved less so. China’s largest e-commerce company slumped 3.7 percent to $90.46 last week after having soared 38 percent in its Sept. 19 debut on the New York Stock Exchange.
Alibaba, which was founded 15 years ago by Jack Ma, started trading after its record $25 billion initial public offering amid reports that indicated the world’s second-largest economy is slowing as the housing market slumps. While investors looking to tap into the world’s largest market of Internet users piled into the IPO, the economic slowdown is spurring concern the company, which gets almost 90 percent of its sales from China, may struggle to sustain growth.
More
Offshore Yuan Falls Most in Two Weeks Amid Hong Kong Protests
Sep 29, 2014 4:07 AM GMT
The yuan traded in Hong
Kong fell the most in two weeks on concern clashes between pro-democracy
protesters and the police in the city will deter investors. Over the weekend police fired tear gas and pepper spray to scatter protesters in the largest crackdown since the Asian city returned to Chinese rule. The People’s Bank of China reduced the yuan’s reference rate by 0.05 percent to 6.1539 against the dollar, the weakest the level in three weeks, as the Bloomberg Dollar Spot Index advanced for a sixth day and before the start of a week-long national holiday from Oct. 1 to Oct. 7.
“Investors are jittery and wouldn’t want to get too exposed to Hong Kong-related assets,” including the offshore yuan, said Suan Teck Kin, a Singapore-based economist at United Overseas Bank Ltd. “I expect the yuan to weaken onshore and offshore with the holidays coming up as people will want to close their positions.”
----Profits at industrial companies in China declined last month for the first time in two years, an official official report showed Sept. 27. The figures confirm evidence of a significant slowdown in manufacturing, and will affect Chinese asset prices, Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole CIB, wrote in a note today.
Protesters in Hong Kong are demanding Chief Executive Leung Chun-ying resign. The demonstrations were spurred by the Chinese government’s decision last month that candidates for the 2017 election of the city’s leader be vetted by a committee. The pro-democracy forces say the system is designed to produce a new leader effectively handpicked by the government in Beijing.
More
We close for the day with dying Europe, busy
committing economic suicide for Uncle Scam. And Russia hasn’t really retaliated
yet, just sounded off about the last round of idiotic EU sanctions, and winter
looms. Below paymaster Germany proposes to make Europe’s death even quicker. Which country will be first to exit the euro?
"Sooner or later both the Greek population and international creditors will tire of fighting a losing battle, leading to a break-up of the currency union as Greece pulls out, probably followed by other countries"
Douglas McWilliams, chief executive of the Centre of Economics and Business Research.
Germany’s fiscal tightness threatens eurozone revival
The German mantra has long been that the rest of the eurozone has been insufficiently Germanic
----But as the days have passed, I have found myself musing on why it is that the eurozone economy is currently doing so badly.
Quite how badly it is doing only
comes clearly into focus when you look at it in comparison with the rest of the
world. In Q2 output in the eurozone was flat. In Germany, Italy and Greece it
contracted. This followed a less than stellar Q1, when eurozone GDP grew by
0.2pc. And in 2013 it contracted by 0.4pc.
You could be forgiven for
thinking that the recent sluggishness in the eurozone is part of generalised
world economic weakness. But this isn’t true. Admittedly, there are pockets of
softness. The Chinese economy has undoubtedly slowed and some judges think that
it will slow a good deal further. But this softness is for Chinese domestic
reasons. The rest of emerging Asia does not share this softness. Russia too has
weakened but that again is for largely domestic reasons, made worse by
sanctions and anxiety about the country’s position in the world.
The recent softness of commodity
prices, especially oil, could be taken to confirm the hypothesis of weak world
demand. But this doesn’t stack up either. Price weakness is due to increased
supply, affecting both oil and agricultural softs. As the eurozone is a
substantial net consumer of these commodities, price weakness should have
helped, rather than hindered, its recovery.
----So why the weakness in the eurozone? One explanation is that the Ukrainian crisis has depressed activity in Europe’s core, especially in Germany. There is something in this. The weakness of German business confidence is partly caused by this, as Germany is a substantial exporter to Russia. But this explanation alone does not bear much weight.
It is striking that some of the
peripheral countries, especially Spain, have cut back their imports and
increased their exports. This may have made things more difficult for the two
big surplus countries, Germany and the Netherlands. To the extent that this has
happened it is deeply ironic. For the German mantra has long been that the rest
of the eurozone has been insufficiently Germanic. If the peripheral countries
battened down the hatches and behaved as though they were, if not Prussian,
then at least Bavarian, all would be well. In fact, I always suspected that
Germany was able to be so Germanic precisely because the other members of the
eurozone were not – that is to say, they spent freely and ran substantial
current account deficits.
Meanwhile, two of the zone’s
largest economies, France and Italy, are mired in a slump that is of domestic
origin. Uncompetitive and anti-business, badly governed and failing to reform,
short of a miraculous transformation or a strong pick-up in demand elsewhere,
these countries will struggle to deliver reasonable growth.
In the face of all this, the
German government is planning to run a balanced budget over the next several
years even though the Maastricht Treaty would allow it to run a deficit of 3pc
of GDP. German fiscal plans envisage its debt to GDP ratio falling sharply. So
the German public finances will be in much better shape than just about
anywhere else in the advanced world – including the UK. Bully for them. But
this fiscal tightness will only worsen the economic crisis caused by a lack of
domestic demand.
More
"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
At the Comex silver depositories Friday final figures were: Registered 66.49 Moz,
Eligible 116.89 Moz, Total 183.38 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more on our new lawless age. The scandal that broke last week at
the UK’s largest supermarket chain, seems all too likely to grow. Our central
bank stock market global bubbles are completely vulnerable to our new lawless
age. Unlike the banksters, however, UK grocers no matter how big, aren’t
eligible for mountains of free cash from the BOE. But if Tesco’s accounts are
dodgy, are all the other retail accounts pure as the driven snow? I suspect
that we are about to findout.
Investigation into Tesco's £250m profit shortfall unearths 'corruption' of culture
Poor company culture is to blame for improper practices at the supermarket giant, it is claimed
The investigation into a £250m
black hole in Tesco’s profits is centring on the culture of the retailer, with
concerns that managers may have been pressurised into using improper practices.
A source said there were fears
there had been a “corruption of virtues” among staff and that the key to the
investigation was establishing “what led people to do these things” and “why
people didn’t say things earlier”.
The source said the incident was
a “human tragedy”, adding: “Why did people go over lines that basic values
suggest they shouldn’t have, we need to look at the culture.”
Tesco is reeling from one of the
worst weeks in its history after a whistleblower in the company’s accounting
team alerted new boss Dave Lewis to a £250m shortfall in the retailer’s
expected half-year profits. The shortfall was caused by Tesco booking income
from deals with suppliers earlier than it should at the same time as pushing
back costs.
Four executives have been
suspended, including the UK chief executive Chris Bush. The company has hired
Deloitte and its legal firm Freshfields to investigate the cause of the
shortfall. They are also looking at whether Tesco’s accounting problems spread
beyond the last six months and the UK food business. It is understood the
retailer has still not given the all-clear to its overseas operations and its
accounts before the last six months.
----Tesco shares fell by 16pc last week as the City reacted to the crisis. However, its struggles are good news for one of Britain’s biggest hedge funds, Lansdowne Partners, which is sitting on a profit of more than £65m as a result of the debacle. Lansdowne, which is run George Osborne’s best man Peter Davies, holds a short position of 0.62pc in Tesco shares. According to filings with the Financial Conduct Authority, it first took this position in November 2012. Since then, shares in Tesco have fallen by more than 40pc, meaning that Lansdowne is sitting on a healthy paper profit.
One former supermarket executive
said it was likely that management and the buyers at Tesco had been under
“extreme pressure” as sales fell in 2014. They said the practice of bringing
forward profit is likely to have been “widespread” given the scale of the
shortfall and questioned the quality of the governance at Tesco.
“It does not take a whistleblower
to discover this,” they said. “You have to be seriously off the pace not to
know this is what was going on.”
More
Low-price Aldi is new ‘consumer champion’
Aldi's sales grew 35.7pc to £5.3bn in 2013, with like-for-like sales up 30pc
The UK bosses of Aldi say the
discount retailer is benefiting from a “lack of trust” in traditional
supermarkets and that its sales have actually been boosted by the price war
among the "big four"
Speaking as Aldi unveils a
stellar set of annual results, Matthew Barnes and Roman Heini said the German
retailer had emerged as the new “consumer champion”.
Aldi reported that sales grew
35.7pc to £5.3bn in 2013, with like-for-like sales up 30pc, driving pre-tax
profits up 65.2pc to £261m. The company said it paid £62.8m of corporation tax
in the UK, a rate of 24pc.
Mr Barnes said Aldi had a
“spectacular” year, but is growing even faster in 2014.
The rise of Aldi highlights the
pressure on the “big four”, Tesco, Asda, Sainsbury’s and Morrisons. Sainsbury’s
is expected to post a fall in like-for-like sales of roughly 3.5pc on
Wednesday, while Tesco is reeling from a trio of profit warnings and the
discovery of a £250m black hole in its accounts.
More
"a company for carrying out an undertaking of great advantage, but nobody to know what it is".
The South Sea Bubble 1720
The monthly Coppock Indicators finished Aug.
DJIA: +152 Down. NASDAQ: +312 Down. SP500: +231 Down.
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