Baltic Dry Index. 1077 +02
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“All
the world is made of faith, and trust, and pixie dust.”
J. M.
Barrie, Peter Pan
We open today with the day’s magic numbers from
China. No they don’t believe them in Beijing any more than I or the Great
Vampire Squids do. But all that matters is that CNBC and the Muppets do. And do
they ever!
“Dreams do come
true, if only we wish hard enough. You can have anything in life if you will
sacrifice everything else for it.”
Janet
Yellen, with apologies to J. M. Barrie, Peter
Pan
Manufacturing Rebound Relieves Growth Concerns in China: Economy
Sep 23, 2014 5:45 AM GMT
A Chinese manufacturing gauge unexpectedly increased this month, suggesting
export demand is helping the economy withstand a property slump. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.5, matching the highest estimates in a Bloomberg News survey of analysts and up from August’s final reading of 50.2. Asian stocks pared declines, the Australian dollar rallied and copper advanced.
Today’s report contrasts with August data that showed weaker growth and may ease pressure for stimulus that’s broader than the limited liquidity injections and expedited spending on railways that Premier Li Keqiang’s government has enacted. With the euro region and Japan battling to shore up expansions, a trough in China’s slowdown would aid a patchy global recovery.
The rebound will “come as a major relief to markets after numerous signs suggesting further downward pressure on the manufacturing sector,” said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong. “The positive surprise should put some upward pressure on FX and rates in Asia.”
More
But…..
China Beige Book Shows Economy Stuck in Low Gear
Sep 23, 2014 1:31 AM GMT
China’s economy remained
stuck in “low gear” this quarter, with struggling retail and residential
real-estate industries countering improvements in manufacturing and
transportation, a private survey showed. Growth in investment slowed further, borrowing costs rose and the share of firms applying for and getting bank loans remained at “rock bottom levels,” according to the China Beige Book, a report published quarterly by New York-based China Beige Book International. In contrast, hiring picked up and corporate profit margins improved, suggesting widespread government efforts to reignite growth are unlikely, it said.
---- A preliminary September reading of a manufacturing Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics due today will give a further indication of the state of the economy. The gauge’s August number fell to a three-month low and a separate PMI from the government also dropped.
More
Elsewhere, it was business as usual. America’s Nobel Peace President went back to
bombs, America’s favourite export to the rest of the world. Just imagine if Russian warplanes were bombing
Ukraine. This being 2014 and not 2013, this time round Uncle Scam is bombing
the people he was proposing to bomb for, just one year ago. It’s getting hard to keep up with who is on
whose side. With Great Britain’s “War President” “Bomber Blair” calling for
feet on the ground in the Levant, at the weekend, not his or his children’s of
course, we will probably see this happen after November’s US election is safely
passed. To this old armchair warrior, safely in foggy southern England this
morning, my guess is that the Islamic State moslem Nazis will now open up a
front in Jordan.
“Oh,
the cleverness of me!”
Tony “Bomber”
Blair, with apologies to J. M. Barrie, Peter Pan
U.S. Conducts First Airstrikes in Syria on Islamic State
Sep 23, 2014 3:36 AM GMT
The U.S. conducted its first airstrikes in Syria, a barrage of attacks
joined by partner nations in a major expansion of President Barack Obama’s effort to “degrade and ultimately
destroy” Islamic State. “U.S. military and partner nation forces are undertaking military action against ISIL terrorists in Syria using a mix of fighter, bomber and Tomahawk Land Attack Missiles,” Rear Admiral John Kirby, the Pentagon press secretary, said tonight in an e-mailed statement.
The U.S. is seeking to reverse the advances of Islamic State, a Sunni extremist group that has seized a swath of territory across Iraq and Syria. The U.S. has conducted more than 190 airstrikes against Islamic State targets, all of them in Iraq until now. ISIL is an acronym for the group’s former name.
While Kirby said he couldn’t provide any details because “these operations are ongoing,” the partner nations joining in the attacks were Saudi Arabia, Jordan, the United Arab Emirates and Bahrain, the Washington Post said, citing two U.S. defense officials it didn’t identify.
More
Obama’s Words on Islamic Militants Come Back to Haunt Him
Sep 22, 2014 5:13 PM GMT
For criticism of President Barack Obama’s
offensive against Islamic State, look no farther than the president’s own
words. In January, he dismissed the Islamic militants as “a jayvee team,” amateurs who posed little threat. In August, he derided the Syrian rebels who now will be key allies as “former doctors, farmers, pharmacists” with less capacity to fight than needed.
On Sept. 3, Obama told reporters his goal was to “degrade and destroy” Islamic State -- then later at the same event said it was to reduce the extremists to “a manageable problem.”
And then, days after Obama said no U.S. ground troops would be used against Islamic State, his top military adviser, Army General Martin Dempsey, the chairman of the Joint Chiefs of Staff, said he might eventually recommend doing so.
Those shifting statements have fed public doubts that the president has a firm grip on what’s needed to defeat the jihadis who now rule over parts of Syria and Iraq and have beheaded two American journalists and a British aid worker.
---- Fifty-five percent of Americans say
Obama has no “clear plan” to deal with Islamic State and only 39 percent approve
of his handling of the militant group, according to a CBS/New York Times poll taken Sept. 12-15.
That was after the president delivered a prime-time television address to
describe his plan.
More
In other USA news, get ready for the end of ZIRP
says Goldie. But is it real or just a ploy for their Muppets? My take, a
4percent yield slams America and everyone else into the wall. A whole fleet on
next Lehman’s will come sailing out, probably led by Alibaba.
“To die would be an
awfully big adventure.”
Jack
Lew, with apologies to J. M. Barrie, Peter
Pan
Goldman Asset Flags 4% Treasury Yield on Quantitative Tightening
Sep 23,
2014 1:38 AM GMT
Goldman Sachs Asset Management predicts Treasury 10-year yields may climb to the highest level in four years as
the Federal
Reserve ends its bond-buying program and weighs the first interest-rate
increase since 2006. The 10-year yield may rise as high as 4 percent over 12 months, the most since April 2010, as the end of so-called quantitative easing adds more interest-rate risk to the market, said Philip Moffitt, the Sydney-based head of fixed income in Asia-Pacific at Goldman Sachs Asset, which has $935 billion in assets under management globally. The yield closed at 2.56 percent yesterday, and touched 2.65 percent on Sept. 19, the highest since July 7.
The Fed is on course to end its bond purchase program next month after tapering monthly buying to $15 billion on Sept. 17 in a seventh consecutive cut. While declining to specify how soon after the federal funds rate will rise, Chair Janet Yellen said policy makers will first increase the benchmark and then cease reinvesting maturing debt from its record $4.45 trillion balance sheet, reducing holdings in a “gradual and predictable manner.”
“Once
the Fed stops buying and reinvesting in Treasuries you get quantitative
tightening,” Moffitt said on Sept. 19 in an e-mailed response to questions.
“The impact will begin as soon as tapering ends, and reinvesting coupons alone
will not be enough to offset the rolldown of stock.”
More
Jack Lew Has No Clue: Things Are Coming Unglued
by Wolf Richter •
As long as major stock indices
around the world keep soaring (forget for a moment the carnage in smaller
stocks), and as long as bonds trade at near all-time highs, and as long as the
yield of dubious government debt is close to zero or below zero so that
borrowing has become a profit center for governments and a loss center for
investors, as long as we live in this wondrous world, who cares about the
global economy?
This is a resounding theme.
Super-ugly data about Japan’s economy piles up, and people say, “Yeah but look,
the Nikkei surges.” And this discussion is over.
It doesn’t matter that the Nikkei
surges as the Bank of Japan is buying every JGB that isn’t nailed down. It’s buying
them from banks, pension funds, and individual investors to pile them up on its
balance sheet where they can be selectively defaulted on without sparking
social chaos. Everyone seems to have accepted the alternative to social chaos,
namely a gradual loss of “wealth.”
So banks, pension funds, and
other investors are selling their JGBs to the Bank of Japan and are looking at
stocks as a place to stash their proceeds. This buying is unrelated to what
companies in the Nikkei are doing. It’s an effort to get rid of increasingly
toxic JGBs. And hedge funds anticipate that pension funds and other investors
are shifting into stocks, and they front-run them, and the Nikkei surges….
But off to the side, in Cairns,
Australia, the finance honchos of the G-20 are meeting this weekend. And
they’re already jabbering. They’re lamenting just how badly the global economy
is faltering. But it was overshadowed by the iPhone 6 razzmatazz and the IPO
hoopla of Alibaba, whose shares give investors ownership in a mailbox company
in the Cayman Islands that has a contract with some Chinese outfit, and nothing
more. But hey, the purpose of owning a stake in a mailbox
company is to make a buck and get out.
An equation that might work
for a while in this era of endless liquidity.
More
We end for today with the Rockefellers pulling out
of Old King Goal and tar sands. They plan to reinvest in “clean energy,”
without showing their hand as to what, where, and how. But with the next
generation of solar cells likely to come in with light to power efficiencies in
the high 30s to low 40s percent, up from today’s 12 to 17 percent, they can
read the future as well as anyone. Toss in arriving practical Megawatt grid
storage, and domestic power storage, and the problem of intermittency
disappears this decade. The electric future is bright, efficient and it’s
clean.
Rockefeller family sells out of fossil fuels and into clean energy
John D Rockefeller built a multi-billion-dollar fortune after founding Standard Oil in the late 19th century
The Rockefeller family, which
made one of the world’s largest fortunes through its vast oil business, is to
slash its investments in fossil fuels to less than 1pc and reinvest in clean
energy.
The Rockefeller Brothers Fund,
which oversees $860m of investments, will divest its coal and tar sands assets
“as quickly as possible”, it said in a statement.
Stephen Heintz, an heir of John D
Rockefeller, who built a multi-billion-dollar fortune after founding Standard
Oil in the late 19th century, said the move away from fossil fuels would be in
line with his ancestor’s wishes.
“We are quite convinced that if
he were alive today, as an astute businessman looking out to the future, he
would be moving out of fossil fuels and investing in clean, renewable energy,”
Mr Heintz said.
The Rockefeller Brothers Fund is
a supporter of the global Divest-Invest
coalition, a group made up of 650 individuals and 180 institutions that
aim to divest more than $50bn of fossil fuel assets.
“We’re making a moral case, but also, increasingly, an
economic case,” Mr Heintz said.
----"Our immediate focus will be on coal and tar sands, two of the most intensive sources of carbon emissions. We are working to eliminate the fund’s exposure to these energy sources as quickly as possible.
"Given the structure of some
commingled investment funds and investments in highly diversified energy
companies, we recognise there may continue to be minimal investments in our
portfolio in those energy sectors, but we are committed to reducing our
exposure to coal and tar sands to less than one percent of the total portfolio
by the end of 2014.
More
"With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people."
F. A. von Hayek
At the Comex silver depositories Monday final figures were: Registered 65.47 Moz,
Eligible 117.67 Moz, Total 183.14 Moz. Inventory is rising rapidly. Bullion flight
from London?
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, Mr Stockman posits Alibaba was the bell
ringing at the top. Who am I to disagree. A fool and his money are soon parted,
so they say, and Wall Street’s Great Vampire Squids live high on the hog
proving it every day.
“The
moment you doubt whether you can fly, you cease for ever to be able to do it.”
Ebenezer
Squid, with apologies to J. M. Barrie, Peter Pan
They Do Ring A Bell At The Top: Alibaba Proves Wall Street Is Off Its Rocker
by David Stockman •
They do ring a bell at the top.
On Friday Alibaba gained $65
billion of market cap in 5 minutes! And that was on top of the $170
billion IPO price—-a valuation that was not all that shabby to begin
with. In fact, BABA weighed in for the opening bell at 20X
its $8.6 billion in sales.
Well, the above red
hot multiple was not actually with reference to the company’s results, but
to its drop-box financials. That is, before the day was over it was
trading at 27X the LTM sales posted for a shell in the Cayman Islands—-an
entity on the word processor of a law office located there which
may or may not receive actual cash dividends and honest accounting statements
from a myriad of entities that do countless things in China.
Ah, yes, in China—-the most
stupendous bubble of unsustainable construction, borrowing, speculation and
corruption known to the pages of history.
So with regards to BABA’s
$230 billion market cap at week’s end, you can say this: None dare call it
price discovery!
What it shows is that Wall
Street is well and truly off it rocker. The Chinese swindlers behind
BABA didn’t even have to tap their home market. These preposterously
over-valued shares were sold overwhelmingly to Wall Street—-to the gamblers,
speculators and robo-traders that have occupied what was once a reasonably
honest capital market.
Its not just that the $25 billion
raised in the offering will go in part to insiders and in part to a blind pool
for the acquisition of anything operating in China or not in China. That
isn’t the real red flag. The real one is, well, an
actual red flag. Namely, the utterly unexamined idea that China is
just another capitalist economy like the US, UK or even Italy, for crying out
loud; and that it is galloping off into a glorious future
and a middle class consumption orgy that will make what takes place daily
in America’s 3,800 Wal-Marts look diminutive.
The Wall Street brokers thus
threw up a storm of statistics about BABA’s GMV(gross merchandise
volume) of $300 billion being 3X that of Amazon. And that the number
of customers at 279 million is more than the number of adult Americans.
Then there are also 8.5 million sellers, 14.5 billion annual orders,
and also customers that are eagerly adopting mobile purchasing—a metric that is
up 38% to 188 million in the last six months yet still only a small fraction of
China’s 700 million internet users. In short, the pitch is a modern
version of “a billion lamps to China”.
Well, I’m sorry kids. China is a
monstrous house of economic cards and an inherently unstable polity that will
blow sky high in a matter of time—-and probably not that much more time. You
can’t capitalize what is nothing more than a proxy for everyday
retail commerce in China’s maniacal economy with a PE meant for real
capitalist enterprises that have invented something of profoundly
transformative significance, such Google—- or in their day, Microsoft,
Intel, IBM and the Ford Motor Company.
MoreAlibaba Banks Bring Home $261 Million in Fees
Sep 22, 2014 4:05 PM GMT
Alibaba Group
Holding Ltd.’s underwriters raked in $300 million in fees after completing
the largest initial public offering in history. The banks received 1.2 percent of the proceeds in fees, according to a regulatory filing. The total IPO size increased to $25 billion the company said today, after the underwriters exercised the option to purchase 15 percent more shares.
Pulling off Alibaba’s IPO is a coup for the five lead banks, which were all given an equal stake in the deal’s success. The fee structure is different from typical IPOs in the U.S., where there’s one lead manager that is awarded much of the fees. Alibaba also used an incentive bonus to coax better performance from underwriters.
Credit
Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., JPMorgan Chase
& Co. and Morgan Stanley each took home 15.7 percent of the fees, while
Citigroup Inc.’s share represented 7.9 percent, according to a regulatory filing
today. Alibaba’s 28 other underwriters earned 1 percent or less each, the
filing showed.
More
“Take
care, lest an adventure is now offered you, which, if accepted, will plunge you
in deepest woe.”
J.M. Barrie, Peter Pan
The monthly Coppock Indicators finished Aug.
DJIA: +152 Down. NASDAQ: +312 Down. SP500: +231 Down.
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