Baltic Dry Index. 1285 +93
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“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.
The Fedster’s picked one hell of a week to drop QE
Forever. Most of continental Europe’s youth generation can’t get a job in the
old GDP economy, and are forced to look for work in the new GDP economy of sex,
drugs and crime. Welcome to the Bilderberger United States of Europe. The older
generations still employed in the old GDP, are all but the banksters in
freefall. Downwardly mobile, as the old socialist tax and spend economies hit
the end of the road, and increasingly the blowback for lunatic Russian
sanctions kick in, in a misadventure effort to save the most corrupt “nation”
in Europe, the Ukraine, from itself, and the American picked bunch of
billionaires now running the place into the ground.
Against this European background the Fedster’s are
about to cut off the hopium of QE forever. Not to worry though, everyone says
continental Europe’s banks are all stress free. Still it might just be best not to
keep any deposits in them above the level where bail-ins kick in. Fedster
action this week, if they drop QE Forever, will likely return stress fast to
the banksters of Club Med and Belgium.
Below, the continental European paradise of the
Bilderberger EUSSR, 2014.
German Ifo Business Confidence Drops for Sixth Month
Oct 27, 2014 9:17 AM GMT
German business confidence dropped for a sixth month as the specter of a
recession haunts Europe’s
largest economy. The Ifo institute’s business climate index, based on a survey of 7,000 executives, dropped to 103.2 in October from 104.7 in September. That’s the lowest since December 2012. Eonomists predicted a decline to 104.5, according to the median of 38 estimates in a Bloomberg survey.
The German economy, which helped the euro area emerge from its longest-ever slump last year, contracted in the second quarter, and the Bundesbank predicts little, if any, growth in the second half. Factory orders, industrial production and exports all plunged the most since 2009 in August, and investor confidence slid for a 10th month in October.
“The latest numbers from the industrial sector are very worrisome,” said Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt. “The third quarter was probably worse than expected, the economy may have stagnated at best.”
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Why Germany's households are more fragile than you think
Stress tests on Europe's households show a severe economic shock would hurt Germany more than France
-----In a new working paper titled "Financial Fragility of Euro Area Households", the ECB examines how different parts of Europe may fare if economic conditions take a turn for the worse.Specifically, the paper models what impact rising unemployment, falling house prices, and higher interest rates could have on household balance sheets, and the potential consequences for financial stability in the Continent.
The survey of 51,000 households across 14 euro-area countries reveal some surprising results about which countries are most vulnerable to a severe economic shock.
One of the ways used to model the risk looks at the losses banks could incur should borrowers fall into trouble and default on their loans.
The blue column in the chart below represents the current state of affairs for lenders from household default as a percentage of their overall debt.
On this measure, German losses are high[er] than its northern neighbours, France and Belgium, and in a similar position to those of Portugal and Spain.
Under conditions of "maximum stress" - defined as a 3pc rise in interest rates, higher unemployment and 20pc fall in property prices - potential bank losses from German defaults are still only slightly less than those in Portugal, and substantially more than those in Slovakia.
Lenders exposed to French householders on the other hand, would see no discernible increase in potential losses should economic conditions deteriorate.
In the words of the paper: "while a relatively low percentage of households in Germany fall in distress, they tend to be deep in their negative financial margins."
More
Riksbanker Who Left in Protest Says Untried Steps Only Hope
Oct 27, 2014 9:48 AM GMT
Lars E. O. Svensson -- a man who has devoted his career to understanding
inflation and who last year left the Riksbank’s board in protest -- says
interest rate cuts alone may not be enough to save Sweden from deflation. As a first step, the central bank will tomorrow need to cut the repo rate -- now 0.25 percent -- to zero, or even minus 0.25 percent, said Svensson, a former Princeton University colleague of ex-Federal Reserve Chairman Ben Bernanke and Nobel laureate Paul Krugman. The bank should then issue guidance that rates will be unchanged for at least two years because its current forecast for tightening late next year is “completely unrealistic,” he said.
Even that “will probably not be enough, so they will also have to think about implementing more unconventional measures” such as asset purchases and maybe even a currency floor, Svensson said in an Oct. 24 phone interview in Stockholm.
Futures on the Riksbank’s repo rate maturing in December slid 2 basis point to 0.175 percent as of 10:41 a.m. in Stockholm.
Svensson, who left the bank in 2013 after failing to win majority support for larger rate cuts, has been vindicated by the events that followed his departure. The bank in July unexpectedly lowered rates back down to financial crisis levels after months of consumer price declines showed the largest Nordic economy risked sinking into a deflationary trap.
That followed a growing tide of public criticism from economists, business leaders and politicians that the bank’s policies were hurting the economy. Krugman in April accused the Riksbank of taking a “sadomonetarist” approach and said Sweden risked repeating the economic mistakes of Japan.
The Riksbank, whose board meets today, will probably cut its main rate to a record low of 0.10 percent, in a decision announced tomorrow at 9:30 a.m. local time, according to the median estimate of 17 economists in a Bloomberg survey.
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Europe’s financial demands will backfire
The EU’s leaders say they want Britain to remain a member, yet behave in precisely the fashion most likely to bring that membership to an end
The original demand from the
European Commission that Britain pay an extra £1.7 billion, because our economy
has had the temerity to grow more rapidly than the Continent’s, could have been
put down, to borrow a phrase used by Ed Miliband in the House of Commons
yesterday, to “cack-handedness”. But subsequent events have only served to
widen the rift between London and Brussels. After David Cameron understandably
raised the strongest possible objections, the EU’s interim Budget Commissioner,
Jacek Dominik, yesterday insisted that this country would be fined if it did
not stump up the cash by December – despite there being no pressing need for
it. He even resorted to threatening Britain’s EU budget rebate.
On its own, this episode would be
bad enough. But it fits a pattern. There has been the concerted effort on the
part of European leaders to slap down Mr Cameron for suggesting that there may
need to be some limitations to freedom of movement, which has resulted in the
uncontrolled immigration that is a subject of huge concern to many British
voters. Then there has been the European Parliament’s unilateral and
high-handed decision to ignore the wider EU budget deal agreed by national
leaders – particularly galling to Britain because it was Mr Cameron who
persuaded his colleagues that Brussels should share the pain of austerity felt
so keenly elsewhere. MEPs are demanding an extra £5.4 billion next year, which
would mean another £680 million of British taxpayers’ money. Not only is this a
case of preposterous effrontery, but such money has a long and ignominious
history of being squandered.
More
U.S. Gains From Good Deflation as Europe Faces the Bad and Ugly
Oct 26, 2014 11:01 PM GMT
When it comes to deflation there’s the good -- and there’s the bad and ugly.
Europe faces the risk of the latter as it teeters on the edge of a recession that could trigger a debilitating dive in prices and wages. The U.S., meanwhile, may end up with the more benign version as surging oil and gas supplies push energy costs down and the economy ahead.
“Bad deflation weakens growth,” Nancy Lazar, co-founder and a partner at Cornerstone Macro LP in New York, wrote in a report to clients this month. “Good deflation lifts growth.” Lazar also co-founded International Strategy & Investment Group LLC more than 20 years ago.
That’s welcome news for U.S. investors. Billionaire Paul Tudor Jones, one of the most successful hedge-fund managers, said on Oct. 20 that U.S. stocks will outperform other equity markets for the rest of the year, according to two people who heard him speak at the closed-door Robin Hood Investors conference in New York.
Hedge fund manager David Tepper, who runs the $20 billion Appaloosa Management LP, told the same conference the following day that investors should bet against the euro, two people familiar with his remarks said.
The people asked not to be named because the meetings were private.
More
Putin Narrative of Abandoned Ukraine East Fueled by Vote
Oct 27,
2014 10:00 PM GMT
Vladimir Putin may
have more ammunition to extend his influence over the Ukraine’s war-torn east
after the country’s parliamentary election. A surge in support for pro-European parties leaves the area, the bedrock of ousted leader Viktor Yanukovych’s popularity, with less of a say in the nation’s future. Parties backing President Petro Poroshenko’s bid to steer Ukraine away from its Soviet past are set to form a coalition, a move that may make reconciliation in the east more difficult and fuel complaints from Putin that Russian speakers are being trampled.
The outcome will muffle input from areas that hug Russia’s border as Poroshenko embarks on a political and economic transformation he says will prime Ukraine for European Union membership. It risks further inflaming tensions between Russia and its former Cold War adversaries, whose clashes over the annexation of Crimea and Ukraine’s insurgency have triggered a wave of sanctions.
“Besides the near-collapse of former President Yanukovych’s camp, several seats have been left unoccupied and the east saw a comparably low turnout,” Otilia Dhand, an analyst at Teneo Intelligence, said by e-mail from London. “Russia will almost certainly challenge the legitimacy and representativeness of these elections.”
----The party of Sergei Tigipko, a cabinet member under Yanukovych, failed to breach parliament’s 5 percent entry barrier. The Opposition Bloc that contains former Yanukovych allies garnered 9.8 percent of nationwide party-list votes, according to early results, a third of what the deposed leader’s Party of Regions received at the 2012 election.
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Elsewhere, it was de-ja-vu all over again, to use
an old baseball technical term.
China Fake Invoice Evidence Mounts as HK Figures Diverge
Oct 28, 2014 3:31 AM GMT
The gap between China’s
reported exports to Hong Kong and the territory’s imports from the mainland
widened in September to the most this year, suggesting fake export-invoicing is
again skewing China’s trade data. China recorded $1.56 of exports to Hong Kong last month for every $1 in imports Hong Kong registered, leading to a $13.5 billion difference, according to government data compiled by Bloomberg. Hong Kong’s imports from China climbed 5.5 percent from a year earlier to $24.1 billion, figures showed yesterday; China’s exports to Hong Kong surged 34 percent to $37.6 billion, according to mainland data on Oct. 13.
While China’s government has strict rules on importing capital, those seeking to exploit yuan appreciation can evade the limit by disguising money inflows as payment for goods exported to foreign countries or territories, especially Hong Kong. The latest trade mismatch coincided with renewed appreciation of China’s currency, leading analysts at banks and brokerages including Everbright Securities Co. and Australia & New Zealand Banking Group Ltd. to question the export surge.
“This is definitely another important piece of evidence of over-invoicing exports to Hong Kong to facilitate money inflow into China,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “So we shouldn’t be too optimistic about recent export data from China.”
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Asian Stocks Fall Before Fed as U.S. Data Disappoint Investors
Oct 28, 2014 12:07 AM GMT
Asian stocks fell, following U.S. shares lower, after American data
from home sales to manufacturing fell short of estimates and investors awaited
a Federal Reserve decision on its stimulus program. The MSCI Asia Pacific Index (MXAP) dropped 0.1 percent to 138.22 as of 9:02 a.m. in Tokyo, before markets opened in Hong Kong and China. The Fed will probably eliminate its remaining $15 billion in monthly bond-buying when it concludes a policy meeting tomorrow, and leave its key interest rate unchanged at a range of zero to 0.25 percent, according to surveys of economists conducted by Bloomberg.
“We are not sure that there will be a smooth handover from Fed QE to sustainable economic growth without financial market instability,” said Stewart Richardson, who helps oversee $100 million at RMG Wealth Management LLP in London. “We fear that recession risks, even in the U.S., are higher than most would care to admit because of weak overseas economies and potentially vulnerable financial markets with no QE to support them.”
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“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.
Ben Bernanke 2002
At the Comex silver depositories Monday final figures were: Registered 66.74 Moz,
Eligible 113.43 Moz, Total 180.17 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Crude oil, going down. America asked the Saudis to
take out Russia. But taking out Russia also takes out America’s heavily indebted
frackers, and Canada’s tar babies. With China, the EUSSR and the other BRICS
all slowing fast, we are entering a winter of the Great Glut of Crude.
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.
Oil Speculators Bet Wrong as Rebound Proves Fleeting
Oct 27, 2014 10:07 AM GMT
Hedge funds rushed
back into oil too quickly, boosting bullish bets amid a rebound last week, only
to then watch surging U.S. crude supplies push prices right back down to a
two-year low. The net-long positions in West Texas Intermediate futures rose 5.7 percent in the seven days ended Oct. 21, U.S. Commodity Futures Trading Commission data show. Short bets shrank 20 percent, the most in three months, while longs dropped 2.8 percent.
After rising as analysts speculated prices had reached a floor, WTI sank again after stockpiles climbed nationally and at Cushing, Oklahoma, the delivery point for New York Mercantile Exchange futures. It fell to $80.52 on Oct. 22, the lowest settlement since June 2012, and ended the week down 24 percent from the year’s high. The U.S. benchmark, which slipped into a bear market Oct. 9, may dip to $75 by the end of year, Bank of America Corp. said Oct. 23.
The “swiftness of the selloff” attracted bargain hunters, John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Oct. 24. “People came in and tried to pick the bottom, and they picked wrong.”
U.S. oil inventories increased 7.11 million barrels in the seven days ended Oct. 17 to 377.7 million, the Energy Information Administration said Oct. 22. Supply has grown by about 21 million in three weeks.
More
Goldman Cuts Oil Forecasts as U.S. Market Clout Increases
Oct
27, 2014 9:05 AM GMT
Goldman
Sachs Group Inc. (GS) cut its forecasts for Brent and WTI crude prices next
year on rising global supplies, predicting OPEC will lose influence over the
oil market amid the U.S. shale boom. The bank is becoming more confident in the scale and sustainability of U.S. shale oil production and said U.S. benchmark prices need to decline to $75 a barrel for a slowdown in output growth. Brent will average $85 a barrel in the first quarter, down from a previous forecast of $100, and West Texas Intermediate will sell for $75 a barrel in the period, from an earlier estimate of $90, analysts including Jeffrey Currie wrote in a report.
The biggest members of the Organization of Petroleum Exporting Countries are discounting supplies to defend market share rather than cutting production to boost prices that have collapsed into a bear market.
The highest U.S. output in almost 30 years is helping increase stockpiles as exporters including Saudi Arabia reduce prices to stimulate demand.
“We believe that OPEC will no longer act as the first-mover swing producer and that U.S. shale oil output will be called upon to fill this role,” Goldman said in the report. “Our forecast also reflects the realization of a loss of pricing power by core-OPEC.”
Any near-term OPEC production cut will be modest until there is sufficient evidence of a slowdown in U.S. shale oil production growth, according to the report. Global producers may need to cut almost 800,000 barrels a day of output next year to limit a build in inventories and ultimately balance the global oil market in 2016, Goldman said.
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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.
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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