Baltic Dry Index. 1038 -18
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
But Mousie, thou are no thy-lane,
In proving foresight may be vain:
The best laid schemes o' Mice an' Men,
Gang aft agley,
An' lea'e us nought but grief an' pain,
For promis'd joy!
In proving foresight may be vain:
The best laid schemes o' Mice an' Men,
Gang aft agley,
An' lea'e us nought but grief an' pain,
For promis'd joy!
To a Mouse. Robert Burns.
The best laid schemes of
stock market asset price inflation came crashing down yesterday as Apple’s
great plough, aka download iOS 8.0.1, smashed through the talking chair’s comfortable nest,
and tossed the market, if not yet the Fedster’s, out of their all too
complacent “tiny nest.”
Below, shock and awe in our Great Disconnect. Interest rates might
actually go up!
“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.
This stock selloff has everyone talking about ‘divergence’
Published: Sept 25, 2014 5:20 p.m. ET
NEW YORK (MarketWatch) —
Strategists have few pat answers to explain the carnage across U.S. stocks on
Thursday, but it’s clear that concerns over divergences within and between
markets is taking a toll on investor sentiment.
“I think its’ a confluence of
catalysts occurring,” said Adam Sarhan, chief executive of Sarhan Capital, in a
phone interview.
Investors are again growing
uneasy over what will happen when the Federal Reserve withdraws quantitative
easing, he said. Other pressures include long-standing but recently dormant
geopolitical fears as well as internal divergences between suffering small-cap
stocks and the broader market and technical factors, including the S&P 500
index’s fall through its 50-day moving average.
See: Stock market live blog for a rundown of other potential
catalysts cited by strategists.The tone also wasn’t helped by remarks by Iraq’s prime minister, who warned of potential plots by Islamic State to launch terror attacks on subway systems in New York and Paris.
Stocks saw their biggest one-day drop since July 31, with the Dow Jones Industrial Average DJIA, -1.54% falling 264.26 points to 16,945.80. The S&P 500 SPX, -1.62% dropped 32.31 points, or 1.6%, to 1,965.99, while the Nasdaq Composite COMP, -1.94% dropped 1.9% to 4,466.75.
Gold, which has suffered a bruising September beat-down, rebounded from early losses to end $2.40 higher at $1,221.90 an ounce.
More
Is the stock market bubble of 2014 ready to burst?
Published: Sept 25, 2014 1:21 p.m. ET
Is the stock market in a bubble?
The answer is yes, absolutely, you bet it is. The interesting part is that it
is not the only asset class that is in a bubble. In addition to the stock
market, real estate is also in a bubble, and these prices have absolutely been
influenced by FOMC policy.
Although I'm not making
observations outside of the United States, the policy of central banks to
inflate asset prices using a tool invented, it seems, by Ben Bernanke certainly
has reshaped economic conditions, and thus far, they have prevented a Greater
Depression.
----It is important to note here
that my macroeconomic tool is a demographic analysis using societal norms and
lifetime investment patterns to identify longer-term economic cycles.
Over the years, it identified
strength in the economy by seeing that more and more new money was naturally
available to invest in the economy, and conversely times in which fewer and
fewer new investment dollars were available to invest naturally. That is, as of
December 2007, where we exist on a naturalized basis in today's economy.
The twist is that FOMC policy has
caused us to diverge from that natural condition. According to the FOMC, they
will officially end their bond-buying program in the next meeting unless
extraordinary circumstances arise. My analysis to clients suggests that the net
real stimulus in the financial system is already negative when the operations
of the U.S. Treasury are included, but everyone can see that the stimulus
program is ending, and as it comes to an end, the economy is again allowed to
operate on a more natural basis.
The question I pose to you is if
the economy actually would have been weakening over the past few years on a
naturalized basis as my analysis suggests, but instead it has been supported by
capital injected by the FOMC to inflate asset prices, what do you think will
happen when the money flows stop?
My answer to clients, and now in
this public forum, is that the economy will revert back to its naturalized
condition, which is much weaker than it is today, suggesting that both the
stock market and real-estate prices will contract, and according to the
differential I have provided to clients, that means a crash is looming.
We are absolutely in an asset
bubble today, there is no question about it in my mind, and it is the result of
FOMC policy. The only way to avoid a crash is to continue to pump money into
the system and support an economy that is, in every sense of the word, addicted
to stimulus.
More
iOS8 glitch wipes $20bn off Apple
Shares in iPhone maker slide more than 3.5pc after it is forced to pull iOS8 software update
More than $20bn was wiped off the
value of Apple
after the technology giant was forced to pull
the latest update for its new iOS8 operating system just an hour after
its release.
The technology giant apologised
after customers who downloaded iOS 8.0.1 on their iPhones were left unable to
make calls.
“We apologise for the great
inconvenience experienced by users and are working around the clock to prepare
iOS 8.0.2 with a fix for the issue,” Apple said.
However, the apology fell flat
with investors. Shares in the gadget maker tumbled 3.8pc in New York, pushing
them below the psychologically important $100 threshold to $97.87. Apple led
the technology sector lower, causing the Dow Jones Industrial Average to shed
264 points.
The dip comes less than a month
after Apple shares reached a record high of $103.74.
The technology giant released the
first patch for its new operating system on iPhones and iPads on Wednesday
afternoon in a bid to fix a series of issues.
However, users who downloaded it
complained that they lost phone signal, leaving them unable to make calls.
Others said the Touch ID feature, which allows people to unlock their iPhone
using their fingerprints, no longer worked.
More
With a great global slowdown from Australia, to
Brazil, to China, to suicidal Europe, to Russia, underway, most industrial commodities,
led by iron ore and Dr. Copper, have been signalling trouble dead ahead for
some time. Now with the Great Fedster, “the talking chair,” about to pull the
last tranche of QE Forever from America’s Squids and Banksters next month, and
with the ECB doing no more than fiddling while the EUSSR burns, and no sign of
a fire brigade arriving from China, a harsh dose of unwanted reality swept the
market yesterday.
But don’t blame Apple. If not update iOS 8.0.1, the ending QE Forever,
ZIRP notwithstanding, triggers the event QE was initiated to prevent in the
first place. Just unhappily for the Fedster’s and their crony Banksters and
Great Vampire Squids, from a much bigger casino stock market bubble and after 6
years of increasing mal-investment.
Adding to the rate rise panic yesterday, an
untimely bit of “forward guidance” from the Old Lady of Threadneedle Street,
plus hints that Russia is planning an October surprise of its own. Something
tells me this sanctions insanity is going to get a lot worse before politicians
come to their senses.
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.
Ludwig
von Mises.
Pound spikes as Mark Carney says first interest rate rise 'getting closer'
Bank of England Governor warns households to prepare for higher borrowing costs
Households should prepare for higher
borrowing costs in the coming months because the point at which interest rates
will start to rise is “getting closer”, according to the Governor of the Bank
of England.
Mark Carney said strong growth
and rapid job creation meant the judgment about when to start raising rates
from a record low of 0.5pc had become “more balanced”.
“Relative to the recent past, the
economic outlook is much improved,” he said at a conference in Wales on
Thursday. “While there is always uncertainty about the future, you can expect
interest rates to begin to increase.”
The pound spiked
by more than half a cent against the dollar to $1.6343 following Mr Carney’s
comments, while the benchmark FTSE 100 index in London fell 1pc to 6,639.71
amid speculation that Russia could seize foreign assets in response to Western
sanctions over the Ukrainian crisis.
More
Putin Party Lawmaker Drafts Bill on Foreign-Asset Freeze
Sep 26,
2014 12:06 AM GMT
A member of Russia’s ruling party proposed a law that would allow the
seizure of foreign states’ assets in the country after the U.S. and its allies
targeted President Vladimir Putin’s inner circle including a childhood friend
with asset freezes and travel bans. The draft seeks to benefit citizens or companies that had property outside Russia seized under an “unlawful” judgment from a foreign court, according to the State Duma’s website.
The government would use budget funds to compensate the victim, and the courts would have the right to go after foreign states’ assets in Russia, including property under diplomatic immunity, according to the proposal.
More
What is needed for a sound expansion of production
is additional capital goods, not money or fiduciary media. The credit expansion
is built on the sands of banknotes and deposits. It must collapse.
Ludwig von Mises.
At the Comex silver depositories Thursday final figures were: Registered 66.76
Moz, Eligible 116.50 Moz, Total 183.26 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Thought for the weekend, does history repeat?
True, governments can reduce the rate of interest
in the short run, issue additional paper currency, open the way to credit
expansion by the banks. They can thus create an artificial boom and the
appearance of prosperity. But such a boom is bound to collapse soon or late and
to bring about a depression.
Ludwig von Mises.
Edward Bonham Carter: The forgotten financial crisis of 1914 has parallels 100 years on
Recent years can be compared with a forgotten crisis. Edward Bonham Carter looks back to when his own great grandfather was prime minister
By Edward Bonham Carter 9:40AM
BST 25 Sep 2014
In June 1914, Archduke Franz
Ferdinand was shot in Sarajevo by Serbian nationalist Gavrilo Princip. In
London, markets barely registered the event. It was only a month later when
Austria delivered an ultimatum to Serbia that investors woke up to its implications.
What followed, according to
Richard Roberts, author of Saving the City, The Great Financial Crisis of 1914,
was "the most severe systemic crisis London has ever experienced". It
was not a typical crisis in that it was not preceded by enormous overborrowing
and wild speculation. Instead there was a "displacement" moment in
the form of the Austrian ultimatum – an extraordinary event that drastically
altered investors' perception of risk.
The collapse of Lehman Brothers
in September 2008 was a similar moment.
The response to Austrian
aggression was a dramatic fall in European markets. Investors rushed to turn
their assets into cash or gold. The London Stock Exchange closed its doors for
the first time since its establishment in 1801.
Panic spread quickly via the
telegraph and a newly established global financial system, affecting some 30
countries. At the heart of this system was the City of London. Thanks to its
openness the City had become a settlement hub for much of the world's trade
payments and had the largest securities market.
A key way to transfer money for
cross-border trade was the sterling bill of exchange, making the pound the de
facto reserve currency for the world at that time and meaning large amounts of
debt were owed by overseas investors to British banks. Unfortunately, no one
had considered what problems this connectivity might cause if things went
wrong. Almost 100 years later, no one in 2008 had considered the full
implications of even greater connectivity between banks, until it was too late.
The first to be hit by the crisis
were the "jobbers" or market makers who could not price securities
that everyone wanted to sell. Many firms went out of business. Second were the
money markets (where big banks trade shortterm loans and deposits). Worried
that loans would not be repaid, merchant banks such as Rothschilds and
Schroders refused to issue more sterling bills, meaning no one could borrow
money. Instead banks called in their loans, withdrew funds from the Bank of
England and hoarded gold.
More
“The
U.S. government has a technology, called a printing press (or, today, its
electronic equivalent), that allows it to produce as many U.S. dollars as it
wishes at essentially no cost…We conclude that under a paper-money system, a
determined government can always generate higher spending and hence positive
inflation.”
Dr.
B. S. Bernanke.
Renewed never ending war in the Caliphate, an uneasy
truce in the Ukraine, increasing signs of collapse in Europe and China, the
biggest deliberate bubble ever in stock markets, threats to the underground
transport systems of New York and Paris. Threats to hit back by Russia. It’s a
good job we’re not near our traditional crash season, are we? Have a great autumn
weekend everyone. Winter comes next.
Proper Charlie Munger.
The monthly Coppock Indicators finished Aug.
DJIA: +152 Down. NASDAQ: +312 Down. SP500: +231 Down.
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