Baltic Dry Index. 1456 +28
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“But it (the boom) could not last forever
even if inflation and credit expansion were to go on endlessly. It would then
encounter the barriers which prevent the boundless expansion of circulation
credit. It would lead to the crack-up boom and the breakdown of the whole
monetary system.”
Ludwig Von Mises
Thanks to voodoo economics, QE, ZIRP, Abenomics, and the Great Nixonian
Error of fiat money, fiat currency chaos is now breaking out. A wipe out in
commodities is just getting underway, that will wipe out commodity exporting
countries, wipe out mal invested mining and oil companies, wipe out America’s
frackers, wipe out the EUSSR, and ultimately wipe out banks and fiat currency
itself. Welcome to the folly legacy of “Bubbles” Greenspan and Bernocchio and derivatives
leveraged, financialised casino of 21st century capitalism. We are
on the threshold of a new global depression. It’s no time to impose more
austerity in the EUSSR, or more sanctions on Russia. Time to be long non
financialised, debt free assets with intrinsic value. The benefits of fiat
currency were all front loaded, and long ago dissipated by the west in an orgy
of debt fuelled consumption borrowed from the future. Unhappily, that future is
now arriving. And just wait until after the result of America’s voting today!
We open with crude oil heading down towards $60. Time to keep the petrol
tank only half full.
“The world is a place that’s gone from being flat to round to crooked.”
Mad Magazine.
Nymex oil closes below $79 a barrel
Published: Nov 3, 2014 3:25 p.m. ET
NEW YORK (MarketWatch) — Futures on West Texas Intermediate oil, the U.S.
benchmark, closed below $79 a barrel for the first time since June 2012. Oil
prices remain under pressure from a stronger U.S. dollar and fears Saudi Arabia
could announce another price cut.On the New York Mercantile Exchange, light, sweet crude futures for delivery in December CLZ4, -0.67% dropped $1.76, or 2.2%, to close at $78.78 a barrel, the lowest finish for a nearby futures contract since June 28, 2012.
December Brent crude LCOZ4, -0.70% on London’s ICE Futures exchange fell $1.58 to $84.28 a barrel. Brent crude is widely seen as the global oil benchmark.
Oil extended an early decline after the Institute for Supply Management’s U.S. October manufacturing index rose higher than expected to a reading of 59% from 56.6% a month earlier. Economists surveyed by MarketWatch had forecast a reading of 56.5%.
The reading fueled gains by the U.S. dollar, with the ICE dollar index DXY, -0.21% a measure of the currency against a basket of six major rivals, up 0.5% at 87.315. The dollar soared versus the Japanese yen USDJPY, -0.54% temporarily topping ¥114 to trade at its highest level since 2007. The move higher occurred after the Bank of Japan, on Friday, surprised markets by further expanding its bond-buying program.
A stronger dollar is seen as a negative for commodities priced in the currency because it makes them more expensive to users of other currencies.
---- China is the world’s second-largest oil consumer, and sagging oil demand, due to its slowing economy, has been partly responsible for the slump in global oil prices.
Meanwhile, Saudi Arabia, the
world’s biggest oil exporter, will announce its official selling prices for
December this week. Last month, it slashed prices, with the deepest cuts for
its Asian customers. The price cuts have triggered fears of a price war, which
only has served to push global oil prices lower.
“If there is another aggressive
cut for Asia, there will be loud headlines about market share battles and price
wars, and it could trigger another downward leg in prices,” Societe Generale’s
head of oil research Michael Wittner said.
More
WTI Tumbles to Two-Year Low as Saudi Arabia Cuts Price
Nov 3, 2014 8:59 PM GMT
West Texas Intermediate dropped
to the lowest level in more than two years after Saudi Arabia reduced the cost
of its oil to U.S. customers in the face of soaring North American output.
Futures tumbled 2.2 percent in
New York. Saudi Arabian Oil Co. cut prices for all grades to the U.S., the
company said today in an e-mailed statement. The state-owned producer, known as
Saudi Aramco, will sell Arab Light to clients in Asia for 10 cents less than
Middle East benchmarks, compared with a November discount of $1.05. U.S. crude
imports from Saudi Arabia fell to a four-year low last month.
“The Saudi move speaks to them
wanting to preserve market share in the U.S., where it has slipped recently,”
John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that
focuses on energy, said by phone. “It looks like the Saudis are comfortable
with prices and demand.”
WTI for December delivery fell
$1.76 to close at $78.78 a barrel on the New York Mercantile Exchange. It was
the lowest settlement since June 28, 2012. Prices lost 12 percent last month,
the most since May 2012, and are down 20 percent this year. The volume of all
futures traded was 9.7 percent above the 100-day average at 3:30 p.m. in New
York.
Brent for December settlement
declined $1.08 to $84.78 a barrel on the London-based ICE Futures Europe
exchange. Futures dropped 9.3 percent in October. Volume was 7.8 percent lower
than the 100-day average. The European benchmark crude traded at a $6 premium
to WTI, compared with $5.32 on Oct. 31.
More
Saudi Arabia Signals It Will Let Oil Slide Further, FACTS Says
Nov 3,
2014 3:34 PM GMT
Saudi Arabia, the
world’s biggest oil exporter, is telling the market it won’t cut output to lift
crude back to $100 a barrel and that prices must fall further before it does
so, according to consultant FACTS Global Energy. Swelling supplies from non-OPEC producers drove Brent crude into a bear market on Oct. 8 amid waning demand from China, the world’s second-largest importer. The Organization of Petroleum Exporting Countries meets Nov. 27 to consider changing its production target in the face of the highest U.S. crude output in almost 30 years.
“Production of shale oil in the U.S. will not be hit as hard as the Saudis think” by the price decline, FGE Chairman Fereidun Fesharaki said at a conference today in Doha, Qatar. Producers in the U.S. “can withstand a lot of pressure” by reining in their operating costs before they curb investment in new wells and production, he said.
Crude could drop to between $60 and $80 a barrel and stay within that range there for about six months until global production aligns with demand, Fesharaki said at the Condensate & Naphtha Forum. Oil in that range is the “right price” to balance the market, Fesharaki said.
More
Dollar smashes through resistance as mega-rally gathers pace
HSBC says we are at the early stages of a dollar bull run that will change the world
The US dollar has surged to a
four-year high against a basket of currencies and has punched through key
technical resistance, marking a crucial turning point for the global financial
system.
The so-called dollar index,
watched closely by traders, has finally broken above its 30-year downtrend line
as the US economy powers ahead and the Federal Reserve prepares to tighten
monetary policy.
The index - a mix of six major
currencies – hit 87.4 on Monday, rising above the key level of 87. This
reflects the plunge in the Japanese yen since the Bank of Japan launched a
fresh round of quantitative easing last week.
Data from the Chicago Mercantile
Exchange show that speculative dollar bets on the derivatives markets have
reached a record high, with the biggest positions against sterling, the New
Zealand dollar, the Canadian dollar, the yen and the Swiss franc, in that
order.
David Bloom, currency chief at
HSBC, said a “seismic change” is under way and may lead to a 20pc surge in the
dollar over a 12-month span. The mega-rally of 1980 to 1985 as the Volcker Fed
tightened the screws saw a 90pc rise before the leading powers intervened at
the Plaza Accord to cap the rise.
“We
are only at the early stages of a dollar bull run. The current rally is unlike
any we have seen before. The greatest danger for markets and forecasters is
that they fail to adjust their behaviour to fully reflect a very different
world,” he said.
---- Hans Redeker, from Morgan Stanley, said the dollar rally is almost unstoppable at this stage given the roaring US recovery, and the stark contrast between a hawkish Fed and the prospect of monetary stimulus for years to come in Europe.
“We think this will be a four to
five-year bull-market in the dollar. The whole exchange system is seeking a new
equilibrium,” he said. “We think the euro will reach $1.12 to the dollar by
next year and will be even weaker than the yen in the race to the bottom.”
Mr Redeker said US pension funds
and asset managers have invested huge sums in emerging markets without
considering the currency risks. “They may be forced to start hedging their
exposure, and that could catapult the dollar even higher in a self-fulfilling
effect.”
The dollar revival could prove
painful for companies in Asia that have borrowed heavily in the US currency
during the Fed’s QE phase, betting it would continue to fall.
Data from the Bank for
International Settlements show that the dollar “carry-trade” from Hong Kong
into China may have reached $1.2 trillion. Corporate debt in dollars across
Asia has jumped from $300bn to $2.5 trillion since 2005.
More
Russia Threatened With More Sanctions After Backing Vote
Nov 3, 2014 6:25 PM GMT
Russia backed yesterday’s
rebel-held votes in eastern Ukraine, prompting officials from Germany to warn
the government in Moscow of stronger sanctions. The Russian Foreign Ministry said today it “respected” the ballot, which provided a “mandate to the elected representatives to solve practical tasks and restore normal life in the regions.” Germany denounced the vote and the Ukrainian authorities in Kiev said it poses a threat to the peace process.
“The government does not recognize these illegitimate elections,” German Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, told reporters in Berlin today. “If the situation worsens, it may be necessary to consider intensifying the sanctions.”
Russia is on a collision course with the U.S. and its allies over the ballot held by separatists in the regions of Donetsk and Luhansk a week after they boycotted national parliamentary elections. By defying governments from Kiev to Washington, Russia risks hardening the stalemate in the battle-torn region and provoking another round of sanctions at a time it’s struggling with a currency run and an economy tilting into a recession.
The ruble has been plunging as tensions mount, even after the central bank increased interest rates last week. The currency weakened in thin holiday trading, sliding 0.8 percent to 48.3501 versus the central bank’s dollar-euro basket by 6 p.m. in Moscow, when the central bank stops market operations, after dropping 7.7 percent last month. Russia started a two-day holiday today.
Andreas Schockenhoff, a lawmaker in Merkel’s Christian Democratic Union, said today the European Union must add the names of those who assisted in preparing the rebel balloting to the economic sanctions list. New penalties would be “counter-productive” and Russia remains eager to facilitate dialogue between the government in Kiev and elected rebel leaders, Russian Deputy Foreign Minister Grigory Karasin was cited as saying by Interfax.
More
"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan. 1966.
At the Comex silver
depositories Monday final figures were: Registered 66.22 Moz, Eligible 113.96
Moz, Total 180.18 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
One
wanders to the left, another to the right. Both are equally in error, but, are
seduced by different delusions.
Horace.
Monetary Fallacy? Deep Divisions Emerge over ECB Quantitative Easing Plans
By Anne Seith November
03, 2014 – 01:38 PM
To prevent dangerous
deflation, the ECB is discussing a massive program to purchase government
bonds. Monetary watchdogs are divided over the measure, with some alleging that
central bankers are being held hostage by politicians.
----The only hint that these
employees are sometimes moving billions of euros with the click of a mouse is
the security door that restricts access to the room. They trade in foreign
currencies and bonds, an activity they used to perform primarily for the German
government or public pension funds. Now they also often do it for the European
Central Bank (ECB) and its so-called "unconventional measures."
Those measures seem to be coming
on an almost monthly basis these days. First, there were the ultra low-interest
rates, followed by new four-year loans for banks and the ECB's buying program
for bonds and asset backed securities -- measures that are intended to make it
easier for banks to lend money. As one Bundesbank trader puts it, they now have
"a lot more to do."
A Heated Dispute
Ironically, his boss, Bundesbank
President Jens Weidmann, is opposed to most of these costly programs. They're
the reason he and ECB President Mario Draghi are now completely at odds. Even
with the latest approved measures not even implemented in full yet, experts at
the ECB headquarters a few kilometers away are already devising the next
monetary policy experiment: a large-scale bond buying program known among
central bankers as quantitative easing.
The aim of the program is to push
up the rate of inflation, which, at 0.4 percent, is currently well below the
target rate of close to 2 percent. Central bankers will discuss the problem
again this week.
It is a fundamental dispute that
is becoming increasingly heated. Some view bond purchases as unavoidable, as
the euro zone could otherwise slide into dangerous deflation, in which prices
steadily decline and both households and businesses cut back their spending.
Others warn against a violation of the ECB principle, which prohibits funding
government debt by printing money.
Is it important that the ECB
adhere to tried-and-true principles in the crisis, as Weidmann argues? Or can
it resort to unusual measures in an emergency situation, as Draghi is
demanding?
A Mixed Record in Japan and the
US
The key issues are the wording of
the European treaties, the deep divide in the ECB Governing Council and, not
least, the question of what monetary policy can achieve in a crisis. Is a
massive bond-buying program the right tool to inject new vitality into the
economy? Or does it turn central bankers into the accomplices of politicians
unwilling to institute reforms?
The question has been on the
minds of monetary watchdogs and politicians since the 1990s, when a German
economist working in Tokyo invented the term "quantitative easing."
Its purpose was to help former economic miracle Japan pull itself out of crisis
after a market crash.
The core idea behind the concept
is still the same today: When a central bank has used up its classic toolbox
and has reduced the prime rate to almost zero, it has to resort to other
methods to stimulate the economy. To inject more money into the economy, it can
buy debt from banks or bonds from companies and the government.
----In a study, the Fed itself concludes that its programs reduced the unemployment rate by 1.5 percent in 2012. Other studies found that long-term interest rates on government and corporate bonds declined significantly as a result of the Fed's buying spree. Still others question the efficacy of the programs, especially more recently.
So who's right? "It's nearly
impossible to measure that," says Clemens Fuest, president of the Center
for European Economic Research, "if only because we don't know what would
have happened without the programs."
Strong Side Effects
The lack of certainty has led
many economists to believe that the effects of the bond buying programs were
not all positive. On the contrary, the longer the central bank pumps up the
markets with its injections of liquidity, they warn, the stronger the policy's
side effects get. Because yields on many investments declined along with
borrowing rates, more and more market players ignored the risks associated with
many halfway lucrative business opportunities.
In Europe, for example, bond
traders and other investors began buying up Greek, Spanish and Italian
government bonds after the debt crisis had subsided, so that some of the former
crisis-ridden countries are now paying even lower interest rates on new
borrowing than before. Meanwhile, in the United States, corporate debt
securities known as junk bonds became the latest trendy investment.
More
"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."
Daniel Webster.
The monthly Coppock Indicators finished October.
DJIA: +137 Down. NASDAQ: +275 Down. SP500: +210 Down.
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