Baltic Dry Index. 1464 -20
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"There
is no reason whatever to fear a crash".
Charles
Mackay. 2 October 1845, Glasgow Argus, on Railway Mania.
While America’s Great Vampire
Squids and banksters celebrated the return of the Republicans and America’s War
Party, not that it ever really left, the rest of the world was off facing very
different problems of their own. The Great Disconnect has turned into the
Greatest Disconnect ever, sadly with more to come it seems. From this side of
the Atlantic this morning, it seems
highly probable that the Levant will be getting US boots on the ground next
year, with or without the approval of NATO member Turkey.
Below, compare and contrast.
It’s morally wrong to let a sucker keep his money.
Ebenezer Squid, with apologies to W. C. Fields.
U.S. stocks: S&P 500, Dow at records
Published: Nov 5, 2014 4:41 p.m. ET
NEW YORK (MarketWatch) — The S&P 500 and Dow Jones Industrial Average
closed at new highs on Wednesday, as an upbeat report on the labor market, and
results that left Republicans with a Senate majority, lifted stocks.Investors appeared to give the service sector data a pass, which showed it has been growing at a somewhat slower pace.
S&P 500 SPX, +0.57% gained 11.46 points, or 0.6%, to 2,023.56, with utilities and energy sector stocks leading the gain.
The Dow Jones Industrial Average DJIA, +0.58% jumped 100.69 points, or 0.6%, to 17,484.53. The Dow industrials hit fresh records in tandem with the Dow transports and Dow utilities. A rare occurrence, dubbed Dow Trifecta has happened only 26 times in the history of the averages. The last time this happened was on April 25, 2007, according to FactSet.
The Nasdaq Composite COMP, -0.06% lagged the main benchmarks and closed down 2.91 points or 0.1%, at 4,620.72.
Investors welcomed the results of midterm elections in which Republicans, who are generally viewed as more pro-business, regained control of the Senate. By taking the Senate and keeping the House, the GOP takes control of Congress for the first time in eight years.
Chris Gaffney, senior market strategist at EverBank Wealth Management, said that investors view Republicans as good for business, and took stronger the ADP report as an early indicator that the official jobs report, due on Friday, would be strong.
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Eurozone surveys make for 'grim reading' as region stutters
Early indicators of the euro area's condition in the final quarter of this year suggest that the currency bloc is "limping along", analysts said.
Euro area growth slowed to a "limp" in October and is likely to face slower expansion in the coming months, according to a closely-watched survey of thousands of businesses across the bloc.Markit's purchasing managers’ index (PMI) of the eurozone private sector ticked up by 0.1 points to 52.1 in October. Economists had expected the reading to remained unchanged from September.
At this level, the PMI remains above 50 - the no-change mark - implying that the private sector is growing, albeit at a sluggish pace.
“The eurozone PMI makes for grim reading,” said Chris Williamson, chief economist at Markit, who compiled the survey.
The indicator paints “a picture of an economy that is limping along, and more likely to take a turn for the worse than spring back into life”, he added.
The IMF has said there is a 40pc chance of the euro area slipping back into recession by the end of the first half of 2015.
Subcomponents of the PMI survey suggest that new orders worsened in the month, falling to a 15 month low, while employment fell for the first time since November.
On Tuesday, the European Commission slashed its growth and inflation forecasts for the region, pencilling in growth of just 0.8pc this year.
The data is one of the first indicators of the euro area’s health as it enters the final quarter of the year.
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Ritual Incantation—–The Economic Gibberish Of The Keynesian Apparatchiks
by David Stockman •
If you want an illustration of the utter intellectual bankruptcy of our
Keynesian policy overlords just review the attached Wall Street Journal piece
on yet another downgrade by the EC of its official economic
growth forecast. What’s illuminating is not that the savants of
Brussels were wrong by a country-mile yet again, but that they persist in
a mechanistic numbers game that resembles nothing so much as ritual
incantation.Yep, the Keynesian priesthood is operating from sacred texts and magic numbers. One of these revelations says that 2% inflation was decreed by the great god of GDP and that any shortfall will precipitate his wrathful extractions from growth and jobs. But there is not a shed of empirical evidence for 2% versus 1% or 3% annual change in consumer inflation—–even if it were honestly measured. Its just revealed word as transmitted by the Keynesian priesthood.
Another sacred tenent avers that in handing down the laws of proper economic life, the Keynesian creator ordained that governments everywhere and always must strive to bring GDP growth to its full employment “potential” rate. No exceptions. World without end.
While the texts are not clear on the precise numeric value of this divinely ordained rate of potential GDP growth, today’s congregants claim that it’s about 3%, reflecting the historic trend growth of the labor supply plus productivity gains. In fact, however, we have achieved only about half of that—about 1.8% per annum—-in the US during the last 14 years, and even a lesser fraction in Europe.
Accordingly, this imaginary trend line of “potential GDP” is now far above actual output levels. This yawning gap between the real economy and its revealed potential, in turn, enables the Keynesian priesthood to demand an endless crusade by the fiscal and central banking agencies of the state to close it.
This essentially means that the state’s economic apparatus is now all about stimulus, all of the time. In fact, the state’s central banking branch has gotten so deep into ritualized Keynesian governance that it’s essentially attempting to micro-manage vast accumulations of GDP—-about $17 trillion each in the US and Europe—-on a monthly basis.That’s entirely what the meeting statements and post-meeting press conferences are all about.
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In other news from the real
world.
Iron Drops to Lowest Since 2009 as APEC Curbs Dent Demand
Nov 6, 2014 3:46 AM GMT
Iron ore fell to the
lowest level in more than five years as China ordered some mills to curb output
to cut pollution before hosting a global summit, hurting demand in the biggest
user just as rising supplies exacerbate a glut. Ore with 62 percent content delivered to Qingdao lost 2 percent to $76.46 a dry metric ton, the lowest price since September 2009, according to data from Metal Bulletin Ltd. yesterday. The drop extended two weeks of losses at the end of October and deepened a bear market.
The raw material lost 43 percent this year, underperforming all 22 members of the Bloomberg Commodity Index, as producers including BHP Billiton Ltd. expanded supplies and spurred the surplus. Some mills in the largest buyer were ordered to suspend or reduce output before the summit of leaders at the Asia-Pacific Economic Cooperation forum in Beijing as the authorities sought to improve local air quality. A recovery in prices may take as long as 18 months, according to Anglo American Plc.
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Chinese Stocks Fall for Second Day as Huaneng Power Slumps
Nov 6, 2014 5:19 AM GMT
Chinese
stocks fell for a second day, as utility companies slumped after Huaneng Power International Inc. (600011)
announced a private share sale that was below market prices and energy
producers retreated on concern gains were excessive. Huaneng Power, the listed unit of China’s largest power group, tumbled more than 4 percent in Hong Kong and Shanghai after it announced plans to sell 365 million Hong Kong-listed shares. SDIC Xinji Energy Co. and Wintime Energy Co. slid at least 1.9 percent after jumping more than 60 percent since the end of June. Shanghai Baosight Software Co. and China National Software & Service Co. (600536) advanced more than 3 percent after the State Council said it will promote the use of official versions of software to protect intellectual-property rights.
The Shanghai Composite Index fell 0.3 percent to 2,411.64 at 1:18 p.m. The index has advanced 14 percent this year on speculation the government will introduce more measures to support the economy and as funds flowed into equities before the start of a planned stock trading link with Hong Kong.
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Ukraine Rebels Say Annulment of Autonomy ‘Cancels’ Truce
Nov 5, 2014 12:09 PM GMT
Ukrainian President Petro Poroshenko’s move to revoke the special status of
the rebel-occupied regions that held Nov. 2 elections will “cancel” a
two-month-old truce deal, the separatists said. Poroshenko said yesterday he’ll ask parliament to annul a law granting more autonomy to the eastern regions that was at the center of the Sept. 5 cease-fire agreed between Ukraine, the rebels, Russia and the Organization for Security and Cooperation in Europe. Ukraine says Sept. 5 truce has been broken almost every day since it was signed in Minsk, Belarus.
“The law on the special status and the law on amnesty agreed with the Donetsk People’s Republic and the Luhansk People’s Republic were an obligation for Kiev,” the separatist regions said in a joint statement on their websites today. Canceling the laws will “in fact cancel the Minsk Protocol.”
----“Quite clearly, the de-escalation process has been overturned and we are now seeing escalation, if only on the political level for now,” Samuel Charap, a senior fellow for Russia and Eurasia at the International Institute for Strategic Studies in Washington D.C., said yesterday. “Tensions are rising.”
The Minsk agreement has to be
revised, the separatists said in the statement. They added they’re “meticulously”
adhering to the cease-fire and supporting the peace process. That contrasts
with statements from the government in Kiev, whose Foreign Ministry said
yesterday more than 100 servicemen have been killed and 600 wounded in eastern
Ukraine since the truce was signed.
More
http://www.bloomberg.com/news/2014-11-05/ukraine-rebels-say-annulment-of-autonomy-cancels-truce.html
We end for the day with a winter
weather update for the northern hemisphere. Frigid weather all round.
Harsh Winter Outlook Made a Bit More Dire by Early Snow
Nov 6, 2014 12:01 AM GMT
Remember how evidence was mounting last month that early snowfall was
accumulating across Siberia? And remember how there’s a theory that says this
snowfall signals a cold winter? So in the two and half weeks since, the news for the winter-haters has, unfortunately, only gotten worse.
About 14.1 million square kilometers of snow blanketed Siberia at the end of October, the second most in records going back to 1967, according to Rutgers University’s Global Snow Lab. The record was in 1976, which broke a streak of mild winters in the eastern U.S. In addition, the speed at which snow has covered the region is the fastest since at least 1998.
Taken together they signal greater chances for frigid air to spill out of the Arctic into more temperate regions of North America, Europe and Asia, said Judah Cohen, director of seasonal forecasting at Atmospheric and Environmental Research in Lexington, Massachusetts, who developed the theory linking Siberian snow with winter weather.
“A rapid advance of Eurasian snow cover during the month of October favors that the upcoming winter will be cold across the Northern Hemisphere,” Cohen said in an interview yesterday. “This past October the signal was quite robust.”
----Cold air builds over the expanse of snow, strengthening the pressure system known as a Siberian high. The high weakens the winds that circle the North Pole, allowing the cold air to leak into the lower latitudes.
The term Polar Vortex actually refers to those winds, not the frigid weather.
Cohen said he first noticed the relationship between the Eurasian snow cover and larger weather patterns while doing post-doctoral work at the Massachusetts Institute of Technology in the 1990s.
It came about by chance because the original assignment was to look at the North American snow cover, Cohen said. He changed it to Eurasian and “when we investigated further it turned out it was Eurasian snow cover that was the dominant influence.”
Last year, 12.85 million square kilometers covered Eurasia at the end of October. By January, waves of frigid air were pummeling the U.S. Prices for natural gas, a heating fuel used by half of American households, rose to a five-year high in February.
“The big early snowbuild will definitely set things up for a cold back half of the winter,” said Todd Crawford, a meteorologist at commercial forecaster WSI in Andover, Massachusetts.
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"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice."
Henry Hazlitt
At the Comex silver
depositories Wednesday final figures were: Registered 66.14 Moz, Eligible 115.04
Moz, Total 181.18 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
“Those who don't know history are destined to repeat it.”
Edmund Burke
Mario Draghi's efforts to save EMU have hit the Berlin Wall
If the ECB tries to press ahead with QE, Germany's central bank chief will resign. If it does not do so, the eurozone will remain stuck in a lowflation trap and Mario Draghi will resign
Mario Draghi has finally overplayed his hand. He tried to bounce the European Central Bank into €1 trillion of stimulus without the acquiescence of Europe's creditor bloc or the political assent of Germany.The counter-attack is in full swing. The Frankfurter Allgemeine talks of a "palace coup", the German boulevard press of a "Putsch". I write before knowing the outcome of the ECB's pre-meeting dinner on Wednesday night, but a blizzard of leaks points to an ugly showdown between Mr Draghi and Bundesbank chief Jens Weidmann.
They are at daggers drawn. Mr Draghi is accused of withholding key documents from the ECB's two German members, lest they use them in their guerrilla campaign to head off quantitative easing. This includes Sabine Lautenschlager, Germany's enforcer on the six-man executive board, and an open foe of QE.
The chemistry is unrecognisable from July 2012, when Mr Draghi was working hand-in-glove with Ms Lautenschlager's predecessor, Jorg Asmussen, an Italian speaker and Left-leaning Social Democrat. Together they cooked up the "do-whatever-it-takes" rescue plan for Italy and Spain (OMT). That is why it worked.
We now learn from a Reuters report that Mr Draghi defied an explicit order from the governing council when he seemingly promised to boost the ECB's balance sheet by €1 trillion. He also jumped the gun with a speech in Jackson Hole, giving the very strong impression that the ECB was alarmed by the collapse of the so-called five-year/five-year swap rate and would therefore respond with overpowering force. He had no clearance for this.
The governors of all northern and central EMU states - except Finland and Belgium - lean towards the Bundesbank view, foolishly in my view but that is irrelevant. The North-South split is out in the open, and it reflects the raw conflict of interest between the two halves.
The North is competitive. The South is 20pc overvalued, caught in a debt-deflation vice. Data from the IMF show that Germany’s net foreign credit position (NIIP) has risen from 34pc to 48pc of GDP since 2009, Holland's from 17pc to 46pc. The net debtors are sinking into deeper trouble, France from -9pc to -17pc, Italy from -27pc to -30pc and Spain from -94pc to -98pc. Claims that Spain is safely out of the woods ignore this festering problem.
David Marsh, author of a book on the Bundesbank and now chairman of the Official Monetary and Financial Institutions Forum, says the Bundesbank has been quietly seeking legal advice on whether it can block full-scale QE. It is looking at Articles 10.3 and 32 of the ECB statutes, arguably relevant given the scale of liabilities.
The let-out clauses would make QE the sole decision of the 18 national governors - shutting out Mr Draghi - based on the shareholder weightings. Germany would have 26pc of the votes, easily enough to mount a one-third blocking minority. Mr Draghi would not even have a say.
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Former Communists from East Germany set to return to power
Days before Germany is set to mark the 25th anniversary of the fall of the Berlin Wall, the way has been cleared for the former communists who ruled East Germany to return to power.
The former communists who ruled East Germany are set to return to power – just days before the 25th anniversary of the fall of the Berlin Wall.The Left Party, widely seen as the successor to the SED, East Germany's communist party, is expected to head the government of a German state for the first time since reunification, after the Social Democrats voted to enter a coalition with them in the state of Thuringia.
Many of the Left Party's leadership were senior figures in the old SED, which ruled East Germany as a single-party state. And the prospect of the party's return to power has caused alarm in some quarters.
The German President, Joachim Gauck, abandoned the role's traditional political neutrality to speak out against it.
"People of my age who lived through the GDR [communist East Germany] find it quite hard to accept this," he said, and questioned whether the Left Party "has really distanced itself from the ideas the SED once had about repression of people, so that we can fully trust it".
Angela Merkel, who grew up in the GDR, has said a government headed by the Left Party would be "bad news" for Thuringia.
The state – the birthplace of the composer Bach and home to the city of Weimar, where Goethe and Schiller worked – was part of communist-ruled East Germany until reunification.
The Social Democrats, Mrs Merkel's coalition partner at the national level, have voted to reject an alliance with her Christian Democrats in Thuringia, in favour of becoming junior partner in a government headed by the Left Party. The expected coalition would be completed by the Greens.
The move is seen as a message from the Social Democrats to Mrs Merkel that it has other options in the long-term.
If the expected coalition goes ahead, Bodo Ramelow will become the Left Party's first state prime minister.
Mr Ramelow, who grew up in West Germany, does not have any links to the East German SED. But the fact that many others in his party do has brought Germany's dark past back into the limelight, with some in the Left Party resisting calls to acknowledge that East Germany was a "rogue state".
"Of course the GDR was a rogue state," Mrs Merkel has commented. "A Stasi state has repeatedly trampled human freedom underfoot. What should we call such a state?"
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"When it becomes serious, you have to lie"
Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. Current EC President.
The monthly Coppock Indicators finished October.
DJIA: +137 Down. NASDAQ: +275 Down. SP500: +210 Down.
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