Baltic Dry Index. 963 -11
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
It’s premature to say that global stock markets are
in the first phase of the Great Reconnect, but that’s how it’s starting to look
to me this wet Monday morning. China has signalled it is not about to bailout
Uncle Scam’s stock market, but is about to steal the EUSSR’s business with its former
customer Russia. Europe’s continentals have no one to blame but themselves.
Below, the state of play this morning. A make or
break week, it seems to me.
"The paper standard is self-destructive."
Hans F. Sennholz
Asian Stocks Drop With S&P 500 Futures as Yen, Gold Gain
Oct 13,
2014 5:37 AM GMT
Asian stocks fell with U.S. equity-index futures (DJA), extending a rout that wiped $1.54 trillion from global shares last week, and sovereign
bonds rose amid concern that pledges to keep record-low interest rates won’t
counter a global slowdown. The dollar dropped while gold gained. The MSCI Asia Pacific excluding Japan Index fell 0.8 percent by 12:35 p.m. in Hong Kong, heading for its lowest close since March. Standard & Poor’s 500 Index futures lost 0.6 percent and the Bloomberg Dollar Spot Index retreated 0.4 percent. The yen strengthened to a three-week high as gold jumped 0.8 percent. Brent crude extended last week’s slump, sliding toward an almost four-year low. Ten-year Treasury futures climbed to an 11-month high and Australian bonds rose.
Stocks
have fallen on concern that valuations are too high as the Federal Reserve
removes stimulus and economic indicators from China and Japan to Germany signal
weakness
More
Gold Advances to Four-Week High on Haven Demand as Silver Rises
Oct 13, 2014 3:32 AM GMT
Gold climbed to the highest level in almost four weeks as concern that
global growth is slowing stoked bets the U.S. Federal Reserve may push back
interest-rate increases, boosting demand for a store of wealth. Gold for immediate delivery advanced as much as 1 percent to $1,235.01 an ounce, the highest price since Sept. 17, and was at $1,233.98 at 10:31 a.m. in Singapore, according to Bloomberg generic pricing. Silver, platinum and palladium all increased at least 0.8 percent.
Bullion rose 2.7 percent last week for the biggest gain since the period to June 20 as the Bloomberg Dollar Spot Index snapped a seven-week rally and global equities measured by the MSCI All-Country World Index fell. Should overseas growth be weaker than expected, the effect on the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise, Vice Chairman Stanley Fischer said on Oct. 11.
More
Up next suicidal Europe gets its entirely foreseeable just deserts. With the Russian Grand Prix motor race held on Sunday, President Putin has one less reason for restraint in east Ukraine. And not a moment too soon either. Uncle Scam has just about completed rearming and retraining their Kiev puppet government’s troops. With the US mid-term election held early next month, the puppets are likely held on a short string. After that it’s round two, I suspect, and a whole boat load of more pain for continental Europe. Somebody tell Europe’s elitist politicians that winter is fast approaching. No one will freeze in the USA or UK, but the same can’t be said for the EUSSR and the Ukraine.
Below, the EUSSR in
turmoil, and on the highway to Splitsville.
"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.
Draghi Asset Plan Seen Falling Short With QE Predictions Rising
Oct 13,
2014 12:01 AM GMT
Mario Draghi’s latest
strategy for the euro area is failing to win over economists.
More than 60 percent of the respondents in Bloomberg’s monthly survey say the European Central Bank president’s plan to steer its balance sheet toward early-2012 levels is set to fall short and a growing number predict he’ll resort to large-scale government-bond buying. Two-thirds are unhappy with the lack of details for an asset-purchase program that will start this month after the ECB declined to say how big it will be.
The survey points to possible battles ahead in the Governing Council with some officials already opposing the plan to buy asset-backed securities and covered bonds. At the International Monetary Fund’s annual meetings in Washington, Draghi again signaled that he intends to expand the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to stave off deflation in the euro area.
“The ECB remained utterly vague about the details, especially about the size of the purchase program,” said Duncan de Vries, an economist at NIBC Bank in The Hague. “The advantage for the ECB from not providing all the details is that it keeps flexibility. The disadvantage is clearly that financial markets keep on questioning the ECB’s ability and willingness to fight disinflation.”
More
Europe Forsaken in ETFs as Record Money Pulled on Economy
Oct 13,
2014 12:11 AM GMT
Investors have had enough of Europe. Amid a global selloff that has sent the Standard & Poor’s 500 Index down 5.2 percent in three weeks, losses have been almost twice as big in the Euro Stoxx 50 Index, where last week’s 4.5 percent retreat was the largest since 2012. A record $1 billion was withdrawn from an exchange-traded fund tracking Europe in the period as Mario Draghi, the central-bank president, warned of signs the recovery is losing momentum.
Investors are bailing as the economy threatens to fall back into another recession just after ending the longest contraction in its history last year. Equity losses approaching $1.6 trillion since September mark a reversal for markets that fund managers named as the favorites as recently as July.
----Economic reports this month showed investors have reason for concern. Industrial production in Germany tumbled the most since 2009 in August, while French manufacturing contracted for a fifth month in September while expanding at a slower pace in Spain. Economists forecast Italy’s gross domestic product will probably shrink for a third year. S&P lowered France’s credit-rating outlook to negative from stable on Oct. 10.
The International Monetary Fund cut its outlook for growth in the euro area last week and said the region faces the risk of a recession.
More
Putin Deals China Winning Hand as Sanctions Power Rival
Oct 12,
2014 9:00 PM GMT
Defying his former enemies in the U.S. and Europe may force Vladimir Putin
to aid the ascent of his biggest rival in the east. Isolated over Ukraine, Russia is relying on China for the investment it needs to avert a recession, three people involved in policy planning said, asking not to be identified discussing internal matters. This means caving in to pressure to grant China privileged access to the two things it wants most: raw materials and advanced weapons, two of the people said.
----China is wasting no time filling the void created by the closure of U.S. and European debt markets to Russia’s largest borrowers. A Chinese delegation led by Premier Li Keqiang flew to Moscow yesterday to sign more than 50 agreements in areas including energy and finance, according to state broadcaster China Central Television.
The three-day visit “will inject new impetus to the development of the China-Russia comprehensive strategic partnership,” Vice Foreign Minister Cheng Guoping told CCTV.
Russia’s embrace of China reflects a vulnerability that the country hasn’t experienced since the collapse of the Soviet Union, which triggered a depression that fractured society and led to the emergence of oligarchs who were often at odds with the state. Unlike 1991, Russians now are united in support of their leader and, with $455 billion in foreign currency and gold reserves, the country isn’t broke, according to Lipman.
more
http://www.bloomberg.com/news/2014-10-12/putin-deals-china-winning-hand-as-sanctions-power-rival.html
We end for the day with China. Don’t expect a big new stimulus package,
seems to be the order of the day. Industrial commodities and crude oil, would
seem to have further to fall. Australia, Brazil and South Africa, would seem to
have further to fall as well. In crude oil in particular, Saudi Arabia it seems
to me at least, to be declaring war on America’s heavily indebted frackers. Low
crude prices will kill off any chance of fracking getting underway in Europe.
Beijing Finds Agreement With IMF About Slowing China
Oct 12, 2014 8:54 PM GMT
Central bankers and International Monetary Fund officials agree with
Beijing: a slowdown in the world’s second-largest
economy is considered healthy and there’s no need for further monetary easing. People’s Bank of China Governor Zhou Xiaochuan reiterated the need for “prudent” monetary policy amid steady economic growth and “mild” inflation in an Oct. 11 report to the IMF in Washington. His statement comes before government reports of September inflation and credit this week; August data showed the weakest industrial-output expansion since the global financial crisis and a 40 percent drop in broadest measure of new credit from a year earlier.
The slowing momentum in the Chinese economy is being seen as positive rather than alarming. Moderating growth will make it more sustainable, which will benefit both China and Asia, Malaysia’s Central Bank Governor Zeti Akhtar Aziz said in an interview with Bloomberg News on the weekend. The balance between expansion and structural reforms that China is seeking is right so far, Markus Rodlauer, deputy director of IMF’s Asia Pacific Department, said at an Oct. 10 briefing.
More
Default Risk Alert as Li Shakes Local Safety Net: China Credit
Oct 13, 2014 4:42 AM GMT
Rating companies say the risk of defaults in China has risen as
Premier Li
Keqiang pares implicit guarantees for local-government financing vehicles. The yield premium over the sovereign for three-year AA corporate bonds, the most common grade for LGFVs, widened 21 basis points from last month’s four-year low to 199 basis points on Oct. 10. The State Council said Oct. 2 that the finance arms can no longer raise funds for local authorities, and that the governments have no obligation to repay debt that wasn’t raised to fund public projects. China International Capital Corp. predicts higher yields for new sales, while China Lianhe Credit Rating Co., a Fitch Ratings joint venture, says it can’t rule out defaults.
“The market is entering a new era,” said Chen Jianheng, a Beijing-based fixed-income analyst at CICC. “The time when everybody bought LGFV bonds for high returns without considering credit risks are gone. For any sales in the future, investors will apply a different set of criteria.”
More
"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"
Kenneth J. Gerbino
At the Comex silver depositories Friday final figures were: Registered 66.63 Moz,
Eligible 116.97 Moz, Total 183.60 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
This morning, yet another red flag from China. I
suspect in Chinese property companies, this is just the start rather than the
end of the story.
"Borrowers will default. Markets will collapse. Gold (the ultimate form of safe money) will skyrocket."
Michael Belkin
Agile Tumbles in Hong Kong as Chairman Placed Under Custody
Oct 13, 2014 5:45 AM GMT
Agile
Property Holdings Ltd. (3383) tumbled the most on record in Hong Kong
trading after its billionaire founder and chairman Chen Zhuolin was placed
under the control of Chinese prosecutors. The stock plunged as much as 31 percent to HK$3.30 after it resumed trading following a suspension since Oct. 3 and traded 20 percent lower at HK$3.80 as of 10:25 a.m. local time. The stock was downgraded by at least five brokerages, including JPMorgan Chase & Co. and DBS Group Holdings Ltd., according to data compiled by Bloomberg.
Agile, based in Guangdong province, was told by Chen’s wife that the chairman was confined at a “designated residence” since the evening of Sept. 30 by prosecutors in the southwestern city of Kunming, according to a company filing, which didn’t give a reason for the order. The announcement comes after the developer called off a HK$2.8 billion ($361 million) rights offer last week.
“The custody will likely raise concerns about its land bank and business operation” in Yunnan province, where Kunming City is located, Bank of Communications Co. analysts Toni Ho and Alfred Lau said a note today in which they cut their stock recommendation to a sell. Agile’s land bank in Yunnan makes up about 7.4 percent of its total reserves, they said.
Chen will remain chairman and president and the company appointed Chen’s wife Luk Sin-fong, 53, and brother Chan Cheuk-yin, 47, as executive directors, acting co-chairmen and acting co-presidents, it said. The company doesn’t have any evidence at the moment that Chen’s detention is related to “any lost or misappropriation of funds or assets,” it said.
While the chairman’s detention may not breach any existing loan facilities, the company’s refinancing ability remains a “major concern,” Barclays Plc analysts said in a note yesterday.
“We expect the company to speed up the sales of all its products at bigger discounts,” Alvin Wong and Jianping Chen of Barclays wrote in the note. Its full-year sales target of 48 billion yuan ($7.8 billion) is “unachievable,” they said.
Agile on Oct. 7 said an article on a Chinese website, which linked it to former Chinese security chief Zhou Yongkang who is under investigation for corruption, was groundless and untrue. It said then the report damaged the reputation of the company and it reserved the right to take legal action.
----The company’s $700 million of 8.25
percent perpetual notes sold to investors at par in January 2013 are trading at
69.5 cents on the dollar to yield 12.636 percent, BNP Paribas SA prices on
Bloomberg show. They touched 67.5 cents on Oct. 10, a record low.
More
"The
international monetary order is more precarious by far today than it was in
1929. Then, gold was international money, incorruptible, unmanageable, and
unchangeable. Today, the U.S. dollar serves as the international medium of
exchange, managed by Washington politicians and Federal Reserve officials,
manipulated from day to day, and serving political goals and ambitions. This
difference alone sounds the alarm to all perceptive observers."
Hans F. Senholz
The monthly Coppock Indicators finished September.
DJIA: +141 Down. NASDAQ: +289 Down. SP500: +216 Down.
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