Baltic Dry Index. 1306 +10 Brent Crude 78.10
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"Can't anybody here play this game?"
The talking chair, with apologies to Casey Stengel.
While the EUSSR gets on with the business of wealth destruction and
heads towards the door marked “breakup,” and while America freezes from the
effect of man-made global warming, this morning we take a look at China and
Japan. What could possibly go wrong?
But first this warning on Uncle Scam and the talking chair. Everyone
knows how this all ends just not when.
All
right everyone, line up alphabetically according to your height.
The talking chair, with apologies to Casey Stengel.
Deformations On The Dealer Lots: How The Fed’s ZIRP Is Fueling The Next Subprime Bust
by David Stockman •
On any given day, Janet
Yellen is busy squinting at 19 essentially meaningless labor market graphs
on her “dashboard”, apparently looking for evidence that ZIRP is working.
Well, after 71 months of zero money market rates—-an unprecedented financial
absurdity—-there are plenty of footprints dotting the financial landscape.
But they have nothing to do with
sustainable jobs. Instead, ZIRP has fueled myriad financial bubbles
and speculations owing to the desperate scramble for “yield” that it has
elicited among traders and money managers. Indeed, the financial
system is literally booby-trapped with accidents waiting to happen owing to the
vast mispricings and bloated valuations that have been generated by the Fed’s
free money.
Nowhere is this more evident than
in the subprime auto loan sector. That’s where Wall Street speculators
have organized fly-by-night lenders who make predatory 20% interest rate loans
at 115% of the vehicle’s value to consumers who are essentially one
paycheck away from default.
This $120 billion subprime
auto paper machine is now driving millions of transactions which are
recorded as auto “sales”, but, in fact, are more in the nature
of short-term “loaners” destined for the repo man. So here’s the
thing: In an honest free market none of these born again pawnshops would
even exist; nor would there be a market for out-of-this-world junk paper
backed by 115% LTV/75-month/20% rate loans to consumers who
cannot afford them.
More
Now back to the Asian insanity.
Distressed Debt in China? You Ain’t Seen Nothing Yet, Buyers Say
Nov 20, 2014 1:51 AM GMT
Bad debts in China
are well underestimated because authorities persist in propping up weak
companies and bailing out local investors, according to DAC
Management LLC. The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China, says the worst is yet to come, and that means lots of opportunities for the world’s biggest distressed debt traders.
Nonperforming loans at Chinese banks jumped by the most since 2005 in the third quarter to 766.9 billion yuan ($125.3 billion), official statistics released earlier this month showed. The People’s Bank of China has injected 769.5 billion yuan into its banking system over the past two months to support an economy growing at the slowest pace in more than a decade.
“They keep reporting such a low number for so many years, there’s only one way it can go -- up,” DAC co-founder Philip Groves said in an interview in Hong Kong yesterday. “We’ve yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one.”
More
China Wages Policy Backfires as Costs Prompt Sock-City Blues
Nov 20, 2014 1:34 AM GMT
Wages at Chen Fengying’s sock factory on China’s
east coast have soared almost sixfold in seven years. The 20 percent increase
she expects in 2015 may doom her seven-year-old company as profit and revenue
fall. “If things go on like this, we’ll just close down,” said Chen from Zhuji in Zhejiang province, the so-called Sock City that produces 17 billion pairs annually, more than 35 percent of global production. “Many factories have already died.”
The plight of Chen’s Zhejiang Zhuji Luyi Knitwear Co. highlights the clash between government policies to encourage rapid wage growth and those to spur private enterprise. While both were possible as China’s low-cost manufacturing engine surged, a loss of competitiveness and the slowest economic expansion in a generation is squeezing profitability for credit-constrained small- and medium-sized companies.
Salary increases will slow as a result, hindering the rebalance away from investment-led growth, said Andrew Polk, Beijing-based economist with the Conference Board.
“Wage growth will absolutely have to come down,” said Polk, who estimates China’s expansion will moderate to about 4 percent annually after 2020. “As the economy slows, wage growth slows. It’s one reason why consumption won’t suddenly become a major driver of Chinese growth.”
More
China Factory Gauge at 6-Month Low Bolsters Easing Case: Economy
Nov 20, 2014 4:39 AM GMT
A Chinese factory gauge fell to a six-month low in November, adding to signs
broader stimulus is needed to halt a slowdown in the world’s second-largest
economy. The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.0, below the median estimate of 50.2 in a Bloomberg News survey and lower than last month’s 50.4. Numbers above 50 indicate expansion.
Following readings that showed fixed-asset investment in the first ten months expanded the least since 2001 and credit growth weakened last month, the manufacturing report suggests targeted monetary easing is failing to boost growth, raising the prospect of further policy support.
“It’s clear that the effects of targeted easing measures are waning,” said Hua Changchun, a China economist at Nomura Holdings Inc. in Hong Kong. “It’s quite obvious that the central bank should cut the RRR,” he said, referring to the reserve ratio requirement for banks.
Hua maintained a call for the People’s Bank of China to cut the RRR 50 basis points by the end of this year, followed by four more reductions in 2015.
More
Asia shares hurt by soft China data, yen slides
By Shinichi Saoshiro TOKYO
(Reuters) - Asian stocks
mostly fell on Thursday as factory output data suggesting that China's economy
was slowing dampened investor sentiment, while the yen slid to multi-year lows
against the dollar and euro.The somber mood in equities was expected to carry over into Europe, with spreadbetters forecasting Britain's FTSE .FTSE to open down by as much as 0.1 percent and seeing an effectively flat start for Germany's DAX .GDAXI and France's CAC .FCHI.
The China flash HSBC/Markit manufacturing purchasing managers' index published on Thursday showed factory output contracted in the world's second-biggest economy for the first time in six months.
More
We end for today with the Giant
Ponzi scheme aka Japan. Now even the central bankster running one half of the
hare-brained scheme is getting cold feet. Stay long fully paid up physical
precious metals. In our new lawless, market rigging, fiat money printing age,
everything is going out of control.
Kuroda Says Onus on Lawmakers to Tackle Debt After Abe Tax Delay
Nov 20,
2014 5:19 AM GMT
Bank of Japan
chief Haruhiko Kuroda is putting the onus on the government to strengthen its
finances after Prime Minister Shinzo Abe postponed a sales-tax increase and set
plans for more fiscal stimulus. “It’s the responsibility of parliament and the government, not an issue for the central bank,” Kuroda said yesterday at a press conference. When asked how the delay would affect the growth and inflation outlook, he said: “There is no point giving my personal view.”
Kuroda’s emphasis on the need for fiscal discipline contrasts with Abe’s decision this week to pursue boosting growth before raising the levy. The remarks indicate frustration that Abe may not be following through on his side of a deal that the two struck last year under which the BOJ would stoke inflation while the government repaired its finances and fostered growth, said Hiromichi Shirakawa, an economist at Credit Suisse Group AG who used to work at the BOJ.
“Kuroda must feel like he’s on his own,” said Yasuhide Yajima, an economist at NLI Research Institute. “Ironically, he is helping the government pile up more debt with massive bond purchases. He must be starting to wonder if this is what he really intended to do.”
Kuroda secured a wider majority at yesterday’s policy board for the decision on Oct. 31 to boost already-record easing that sees the central bank ready to buy every new bond issued by the government.
More
Why Japan’s 8% Tax Mauled Economy as Europe Tolerates 20%
Nov 19, 2014 7:39 AM GMT
Japanese Prime Minister Shinzo Abe is discovering that haste makes waste. Trying to double his nation’s sales tax to 10 percent over an 18-month period has resulted in the fourth recession since 2008 and the need to postpone the increase’s second part planned for next October. With an election now pending, the levy may be on hold at 8 percent until 2017.
The lesson is that the increases proved too much, too soon, and baby steps may have been more prudent, with the initial 3 percentage-point boost equivalent to 60 percent of the original level. In contrast, the U.K.’s 2011 increase of 2.5 percentage points amounted to a much smaller 14 percent boost and didn’t generate a recession.
“Proportionally the increase is a lot bigger in Japan, where people are used to paying low consumption tax,” said Julian Jessop, chief international economist at research firm Capital Economics Ltd. in London. “Psychologically it’s a much bigger deal because it’s a meaningful amount of money.”
In fact the planned increase would be almost unprecedented among members of the Organization for Economic Cooperation and Development since sales taxes first began to be introduced in the late 1960s, as governments sought to expand their tax bases through hard-to-dodge revenue-raising measures.
More
Presented without comment.
Banks are an almost irresistible attraction for that element of our society which seeks unearned money.
J. Edgar Hoover
Banking culture breeds dishonesty, scientific study finds
By Kate
Kelland, Health and Science Correspondent
LONDON
Nov 19 (Reuters) - A banking
culture that implicitly puts financial gain above all else fuels greed and
dishonesty and makes bankers more likely to cheat, according to the findings of
a scientific study.
Researchers in Switzerland
studied bank workers and other professionals in experiments in which they won
more money if they cheated, and found that bankers were more dishonest when they
were made particularly aware of their professional role.
---- "Many scandals..have plagued the financial industry in the last decade," Ernst Fehr, a researcher at the University of Zurich who co-led the study, told reporters in a telephone briefing. "These scandals raise the question whether the business culture in the banking industry is favouring, or at least tolerating, fraudulent or unethical behaviours."
Fehr's team conducted a
laboratory game with bankers, then repeated it with other types of workers as
comparisons.
More
A large Bank is exactly the place where a vain and shallow person in authority, if he be a man of gravity and method, as such men often are, may do infinite evil in no long time, and before he is detected. If he is lucky enough to begin at a time of expansion in trade, he is nearly sure not to be found out till the time of contraction has arrived, and then very large figures will be required to reckon the evil he has done.
Walter Bagehot. Lombard Street. 1873
At the Comex silver
depositories Wednesday final figures were: Registered 64.82 Moz, Eligible 113.51
Moz, Total 178.33 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Hackers Can Steal Data Wirelessly From PCs That Aren't Even Online
Nov 19, 2014 6:48 PM GMT
When governments, utilities and
corporations need to protect their most sensitive data, they create what's
called an air-gap network. It involves storing information on computers that
are never connected to the Internet, an extreme method of isolation designed to
prevent any chance of data leaking out.
Air-gap networks were once
considered the "magic bullet" for securing data, but researchers from
Ben-Gurion University in Israel have found a way to compromise those machines.
Once a computer is infected with a particular kind of virus, hackers can trick
the PC into relaying information that can be wirelessly retrieved from a mobile
phone located outside of the room.
The technology won't be used to
steal something as innocuous as your Gmail password. This is some Mission
Impossible stuff that a cyber-espionage gang or state-sponsored hacker
might use to access extremely valuable secrets.
“The scenario is that you go to a
secure facility and leave your cell phone at the entrance,” said Dudu Mimran,
chief technology officer at Ben-Gurion's cybersecurity labs. "The virus
will send the data to your phone."
Computerized medical equipment, military defense and critical infrastructure systems are usually isolated from the Internet. The university's findings have ignited a discussion within cybersecurity circles about the effectiveness of air-gap networks. Since the lab published its findings, its web site and YouTube video got more than 100,000 views combined, according to the university. Not bad for university research on a highly technical topic.
The researchers are now working on ways to mitigate the effects of such a breach. They say they have yet to find a way to protect against the attack other than to store equipment in special metal enclosures or to build walls thick enough to scramble radio frequencies and block the transmission.
Even with paper-thin walls, the heist wouldn't be simple to pull off. Before you can siphon data out, you'd need to somehow get the virus onto the computer. That would probably involve getting a person with physical access to the hardware to, knowingly or unknowingly, plug in an infected USB stick. The malware can reprogram the PC's graphics card to transmit signals over the display cable that can be picked up by a nearby mobile device. The signals are sent over an FM radio frequency, which many modern phones are capable of receiving.
More
"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
The monthly Coppock Indicators finished October.
DJIA: +137 Down. NASDAQ: +275 Down. SP500: +210 Down.
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