Baltic Dry Index. 1395 +110
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”
“Adam Smith” aka George Goodman.
Today we all get to know how many angels can dance
on the head of a pin, in the Gospel according to Washington’s talking chair. Of
course it’s all voodoo economics, but it’s what now passes for economic policy
in the aftermath of failed former guru “Bubbles” Greenspan, and his disastrous
successor Bernocchio. With both having slithered out of town, leaving the fall
to come to the talking chair, today we get the first inkling of just how the
Great Reconnect is going to be played out. With the US mid-term elections just
under a week away, the phony “good times” of 2014 are rapidly approaching their
end. After next Tuesday, the markets no
longer need to be coddled for the voters Potemkin style. If QE really is to be ended, ZIRP and the
talking chair are all that’s left in a global economy rapidly unravelling, and
turning us all into versions of Argentina. Still with the Baltic Dry Index
having just soared from 930 to 1395 in about a week, someone out there seems to
think a boom is coming. [Or a fiat currency collapse.]
Below, what happens next.
"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."
William F. Rickenbacker.
Fed will hold market’s hand as it ends QE3
Published: Oct 28, 2014 9:05 a.m. ET
WASHINGTON (MarketWatch) — The
Federal Reserve will go out of its way this week to send soothing signals to
investors already unnerved by recent market volatility and worries about the
global economy.
There are no press conferences or
updated economic forecasts after the U.S. central bank’s two-day meeting
Tuesday and Wednesday and markets will be left to look for signals from the
Fed’s policy statement, which will be released at 2 p.m. after the talks
conclude.
In the statement, the Fed is
likely to announce that it will stay the course and end its third round of bond
buying, otherwise known as QE3, economists say. For months, the Fed has been
signalling its intention to end the program at this meeting.
As a result, November will be the
first month in 37 months that the Fed will not be buying longer-term
securities, said Michael Gregory, deputy chief economist at BMO Capital
Markets.
The Fed has purchased $1.6
trillion in Treasurys and mortgage-backed securities since September 2012, said
Michael Gapen, economist with Barclays.
The U.S. central bank is also
expected to keep intact its forward guidance that the Fed will wait a
“considerable time” before hiking short-term rates.
More
Fed Decision Day Guide: FOMC Seen Focusing on Too-Low Inflation
Oct 29, 2014 4:00 AM GMT
Here’s what to look for when the Federal
Open Market Committee releases its policy statement at 2 p.m. today in Washington.
Federal Reserve officials won’t provide new economic projections, and Chair Janet Yellen
isn’t scheduled to give a post-meeting press conference. -- With the FOMC poised to halt bond purchases, ending its third round of so-called quantitative easing, policy makers may want to underscore they are troubled by falling inflation and price expectations.
The Fed will “express concern about consistent undershooting of inflation,” said Jonathan Wright, who worked at the Fed’s division of monetary affairs from 2004 until 2008 and now teaches economics at Johns Hopkins University in Baltimore. The committee will “go into reverse to some extent,” restoring language it dropped in July expressing a warning that low inflation poses a risk to economic performance.
More
How American QE has changed the world
As the Federal Reserve prepares to wind down its money printing programme, how has quantitative easing altered the global economy?
The US central bank is widely
expected to end its programme of asset purchasing on Wednesday. It is likely to
be a quiet end to one of the most radical periods of monetary policy in modern
times.
Since the financial crisis, the
Federal Reserve has embarked on an unprecedented programme of asset purchases
that has seen its balance sheet grow to in excess of $4.5 trillion.
Under its most recent programme
of monetary easing - dubbed "QE3" - the central bank has purchased
around $1.6 trillion in government bonds and mortgage-backed securities.
With QE3 now expected wind down,
November could be the first time in more than 37 months the Fed will not be
dipping its toe in the securities market.
As the Fed readies to enter
itself into a brave new world of monetary policy, here's how QE has changed the
global economy.
----Easy monetary
policy has provided the biggest fillip to global stock markets. Equities have
been on a bull run for more than six years, as risk appetite has been buoyed by
low interest rates and bond-buying.
Since September 2012, the S&P 500 has risen more than 40pc.
But as a global sell-off earlier this month has already shown, fears of a meltdown are never far away. The ongoing bleak outlook for global growth means a number of "market corrections" could still be on the horizon.
----For all the reasonable economic data coming out of the US, it is concerns about the global economy that mean another round of Fed bond-buying could still be on the cards.
Stagnant growth in the eurozone, which has begun to experiment with its own form of "QE-lite", is one of the biggest threats to global demand.
More
And in the dying EUSSR, don’t ask. Not even Euro notes marked with a German “X” are safe anymore. Roubles anyone? Just wait until Russia asks to be paid for its gas with Roubles. Why would anyone want to remain in the wealth destroying EU?
Riksbank cuts rates to zero and mulls currency war to fight deflation
Sweden's central bank is having to pick its poison, choosing between deflation or an asset bubble
Sweden’s Riksbank has torn up the rulebook of global central banking, cutting interest rates to zero even though the economy is in the grip of a credit boom.The extraordinary step is intended to stave off deflation but it comes at a time when the Swedish economy is growing at almost 2pc and property prices are rising briskly. The bank has abandoned earlier efforts to curb asset bubbles by “leaning against the wind”.
The Riksbank cut the deposit rate to -0.75pc in what looks like a preparatory move to drive down the krona. Governor Stefan Ingves said the bank has a toolkit of extreme measures in reserve, including use of the exchange rate. The comment is the first hint that Sweden may follow Switzerland and the Czech Republic in imposing a currency floor through unlimited purchases of foreign bonds.
Lars Svensson, the former deputy governor and a world expert on deflation, said the Riksbank is still behind the curve and may eventually have to launch quantitative easing. The bank has been caught off guard by the precipitous fall in inflation, now expected to average -0.2pc this year. The worry is that Sweden no longer has a safe margin against a 1930s deflation trap if hit by an external shock.
The Riksbank faces an acute dilemma, forced to pick between the competing poisons of deflation or an asset boom. It is a variant of the Morton's Fork faced by a growing number of central banks around the world.
More
Italy’s Not Fixed And Its Suicidal Unions Demand To Keep It That Way
by Contributor •
An estimated one million people poured into the streets of Rome on Saturday
to protest Prime Minister Matteo Renzi ’s modest efforts to reform Italy’s
notoriously labyrinthine labor laws. Led by the country’s largest union, the
Italian General Confederation of Labor, or CGIL, the activists want to preserve
Italy’s job guarantees as they are. Call it Italy’s economic suicide movement.Italy’s labor-market rules have remained largely unreformed since the modern Italian state was established. Spread over some 2,700 pages, the labor code divides the labor force into two parts. Older workers benefit from the full weight of the law, including ironclad protections against being laid off, fired or disciplined, whether for performance or economic reasons. That leaves the remainder of the work force, predominately young, to make do with temporary, freelance and other forms of itinerant work.
Then there is the Cassa Integrazione Guadagni. Under this income-assistance scheme, businesses that need to downsize can put some workers on “standby,” and the government will cover a significant share of the normal salary until the company can hire back the worker. The program strains the state’s budget, discourages workers from seeking other jobs, and prevents struggling companies from downsizing to stay competitive.
Need
to fire a worker for poor job performance? To do so, businesses must persuade a
judge that no alternative short of termination was available—a process of
administrative hearings and litigation that can take months and drain company
resources. The World Economic Forum in its 2014-15 assessment of labor-market
efficiency ranked Italy 141 out of 144 countries for hiring and firing
practices, just above Zimbabwe.
More
"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."
Elgin Groseclose
At the Comex silver depositories Tuesday final figures were: Registered 66.74 Moz,
Eligible 113.60 Moz, Total 180.34 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
"The paper standard is self-destructive."
Hans F. Sennholz
China Shadow Banking Shifted to Insurers Alarms Moody’s
Oct 28, 2014 4:00 PM GMT
A doubling in the trust holdings of China’s insurers has
prompted ratings companies to warn the industry may be taking on too much
shadow banking default-risk. Insurers held 281 billion yuan ($46 billion) of trust products on June 30, surging from 144 billion yuan at the end of last year, China Insurance Regulatory Commission data show. The companies’ shadow bank assets, including wealth management products and other financing kept off commercial lenders’ balance sheets, reached 1.14 trillion yuan, or 13 percent of their investments, Standard & Poor’s estimated, adding that this made them “vulnerable in times of stress.”
China Pacific Life Insurance Co., Taiping Life Insurance Co. and Du-Bang Property & Casualty Insurance Co. all expanded trust investment fivefold or more in the first half, a “credit negative” for companies traditionally focused on fixed-income securities, according to Moody’s Investors Service. Fifty-one percent of the trust investment was directed to real estate and infrastructure, making insurers vulnerable to a cooling property market, according to Fitch Ratings.
“If the insurers experience any liquidity problems, they won’t be able to easily turn these trust investments into cash,” said Sally Yim, a Moody’s analyst in Hong Kong. “These assets also tend to be more volatile. The yield may be higher, but there may also be defaults.”
Chinese insurers’ assets doubled in the past five years to 9.6 trillion yuan last month, as premium income climbed an average of 14 percent annually. Squeezed by competition from wealth management products sold by banks and online funds, insurers started offering policies with investment characteristics to compete for money.
More
The Facebook of China Suddenly Has a Myspace Feel to It
Oct 29,
2014 2:23 AM GMT
Renren
Inc. (RENN) was touted the Facebook Inc. of China when it
debuted in New York in 2011. Today it’s looking more like online flameout
Myspace. The stock has lost more than three quarters of its value since 2011 and will drop about 18 percent over the next 12 months to $2.74, according to the average estimate of analysts surveyed by Bloomberg. That’s the most bearish forecast among companies in a Bloomberg index of Chinese stocks traded in the U.S.
Renren is struggling to diversify its business and boost profit as sales slide in a country with 632 million Internet users. The company forecast in August a plunge of as much as 54 percent in third-quarter revenue to $19 million, the smallest amount since at least 2011. While Renren was one of China’s first social media websites, it has been eclipsed by rivals including Tencent Holdings Ltd.’s WeChat and Weibo Corp., backed by Alibaba Group Holding Ltd. (BABA), which have been faster to adapt to the rapidly changing social media industry.
----Like Renren, Myspace Inc. was once a hot
Internet property. In 2005, two years after its foundation, Rupert
Murdoch’s News Corp. bought the social media website for $580 million. In
2006, Myspace had 55 million visitors compared with Facebook’s 15 million,
according to ComScore Inc. In 2008, its advertising revenue reached $605
million before dropping to a mere $47 million by 2011, according to eMarketer,
a fraction of Facebook’s $3.2 billion at the time. The same year, Myspace was
sold for $35 million.
More
"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
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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