Baltic Dry Index. 952 -30 Brent Crude 65.36
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"The principal cause of the crisis was the dismantling of the system of regulation and supervision in the financial sector which had for much of the post-war period kept the most dangerous elements of that sector in check. In the absence of an appropriate system of effective supervision and regulation, what happens is that the actors in the system, who are intent upon taking the greatest degree of risk — including actors who are intent upon using fraudulent methods to increase their returns — come to dominate parts of the system. As they do that, the general methods of assessing performance in the market, specifically stock-market valuations, become counter-productive. That is to say, they invariably reward the worst actors, while they force more traditional actors, who are still respecting the old norms of conduct, into a competitively disadvantaged position. Thus the bad actors, the fraudulent actors, and the speculative extremists quickly take over.”
John Kenneth Galbraith
Suddenly our complacent, disconnected central banker fuelled stock
markets, are plunged into unwelcome new reality. In the real world an oil
pricing war has broken out, while Japan and continental Europe have dropped
into recession, Russia and much of the emerging markets are headed into
recession, China is slowing with little faith in the published figures, with
America far off in dreamland, in a world of doctored figures designed to
support the central banksters script showing an economy heading for escape
velocity. It’s not likely to happen given the latest news from China, while the
Swiss based BIS is warning that the dollar’s surge threatens the whole house of
cards.
This morning it seems as if all the remaining swans are black.
China likely to lower growth target to 7% for 2015: reports
Published: Dec 8, 2014 11:14 p.m. ET
HONG
KONG (MarketWatch) -- As China's top leadership convened Tuesday for the annual
Central Economic Work Conference in Beijing, state media reported the
government might cut 2015's economic growth target to as low as 7%, down from
the 2014 goal of "about 7.5%." Lowering next year's target is a
"a high probability event," and the most likely case is "to set
a 7% target and realize a growth slightly higher than the target," the
state-run China News Service quoted Guan Qingyou, head of research at Minsheng
Securities, as saying Tuesday. China's economy is at a "gear-down"
stage, and 7% growth is enough to create 10,000 new jobs, ensuring sufficient
employment for the economy, the report quoted Niu Li, head of macroeconomic
research at the government's State Information Center policy think tank, as
saying. Niu added that cutting the growth target can reduce the stress on local
governments, allowing them to push ahead with reforms. China's official growth
target numbers usually aren't publically announced until the national
legislature convenes in the spring.
Dollar surge endangers global debt edifice, warns BIS
Bank for International Settlements concerned about underlying health of world economy as dollar loans to emerging markets increase rapidly
Off-shore lending in US dollars
has soared to $9 trillion and poses a growing risk to both emerging markets and
the world's financial stability, the Bank for International Settlements has
warned.
The Swiss-based global watchdog
said dollar loans to Chinese banks and companies are rising at annual rate of
47pc. They have jumped to $1.1 trillion from almost nothing five years ago.
Cross-border dollar credit has ballooned to $456bn in Brazil, and $381bn in
Mexico. External debt has reached $715bn in Russia, mostly in dollars.
A chunk of China's borrowing is
disguised as intra-firm financing. This replicates practices by German
industrial companies in the 1920s, which hid their real level of exposure as
the 1929 debt trauma was building up. "To the extent that these flows are
driven by financial operations rather than real activities, they could give
rise to financial stability concerns," said the BIS in its quarterly
report.
"More than a quantum of fragility
underlies the current elevated mood in financial markets," it warned.
Officials are disturbed by the "risk-on, risk-off, flip-flopping" by
investors. Some of the violent moves lately go beyond stress seen in earlier
crises, a sign that markets may be dangerously stretched and that many fund
managers do not really believe their own Goldilocks narrative.
"Mid-October’s extreme
intraday price movements underscore how sensitive markets have become to even
small surprises. On 15 October, the yield on 10-year US Treasury bonds fell
almost 37 basis points, more than the drop on 15 September 2008 when Lehman
Brothers filed for bankruptcy."
"These fluctuations were
large relative to actual economic and policy surprises, as the only notable
negative piece of news that day was the release of somewhat weaker than
expected retail sales data for the US one hour before the event," it said.
The BIS said 55pc of
collateralised debt obligations (CDOs) now being issued are based on leveraged
loans, an "unprecedented level". This raises eyebrows because CDOs
were pivotal in the 2008 crash.
"Activity in the leveraged
loan markets even surpassed the levels recorded before the crisis: average
quarterly announcements during the year to end-September 2014 were
$250bn," it said.
BIS officials are worried that
tightening by the US Federal Reserve will transmit a credit shock through East
Asia and the emerging world, both by raising the cost of borrowing and by
pushing up the dollar.
More
Oil Drops as Deeper OPEC Discounts Signal Fight for Market Share
Dec 9, 2014 5:55 AM GMT
Brent and West Texas Intermediate fell to a five-year low as Iraq
followed Saudi
Arabia in cutting prices for crude sales to Asia, adding
to signs that OPEC’s biggest members are defending market share. Futures dropped as much as 1.3 percent in London to the weakest intraday price since September 2009. Iraq, the second-largest producer in the Organization of Petroleum Exporting Countries, reduced its Basrah Light crude to the lowest in at least 11 years, a price list for January showed. Oil will remain at about $65 a barrel for half a year until OPEC’s output changes or demand expands, according to Kuwait Petroleum Corp.
Crude is trading in a bear market as the highest U.S. production in three decades exacerbates a global glut. Saudi Arabia, which led OPEC’s decision to maintain rather than cut output at a Nov. 27 meeting, last week offered supplies to its Asian customers at the deepest discount in at least 14 years.
“If you want to move product, you discount it,” David Lennox, a resource analyst at Fat Prophets in Sydney, said by phone today. “That is going to continue. Until there are cuts to production, there could be more pain to come.”
Brent for January settlement declined as much as 86 cents to $65.33 a barrel on the London-based ICE Futures Europe exchange and was at $65.54 at 1:39 p.m. Singapore time. It slid $2.88 to $66.19 yesterday, the lowest close since September 2009. The European benchmark crude traded at a premium of $2.89 to WTI. Prices are down 41 percent this year.
More
Don’t Count on Oil Drop Greasing Global Growth
Dec 8, 2014 12:11 PM GMT
The declining price of crude oil may no longer grease the wheels of the
world economy as much as it once did -- and as much as International Monetary
Fund Managing Director Christine
Lagarde expects. Recent history even may be on the side of contrarians like Fatih Yilmaz from London-based hedge fund SLJ Macro Partners LLP. On top of that, advances in energy efficiency and interest rates already at zero are likely to weaken the potential ripple effects of the 37 percent plunge in Brent crude this year.
“It is hard to make a strong statistical statement about the impact of declining oil prices on the global gross domestic product,” said Yilmaz in a Dec. 4 report.
Between 1970 and 2000, a 20 percent decline in oil typically added 0.25 point to worldwide GDP in the subsequent 20 months, his analysis showed. Since 2000, however, that relationship has broken down with the initial impact of an oil drop on GDP actually negative. It turns positive after a year and then fades.
That’s in contrast to Lagarde’s expectation that a 30 percent drop in the price of crude translates into a 0.8 percentage point boost for most advanced countries. Likewise, JPMorgan Chase & Co. estimates global growth is poised to enjoy a 0.7 point boost over two quarters, while Societe Generale SA estimates a 0.3 point lift after a year.
They may be overstating the effect of the oil decline because “some of the routes” that once linked lower oil with higher economic growth are blocked, according to Stephen King, chief economist at HSBC Holdings Plc.
For one thing, in the 1980s and 1990s, declining oil often led the U.S. Federal Reserve to lower interest rates. With U.S. rates already near zero, there’s no room for reductions, and it would take a lot of economic weakness to get it buying assets again, said King.
“In the absence of rate cuts, falling oil prices might unfortunately serve to increase already-widespread fears of deflation,” he said.
More
We end with the silver lining for some. But only if the lower prices get
passed along to consumers aka in the G-7 as serfs. The Great Reconnect seems to
have arrived. The best laid plans of mice and crooked central banksters are
going down the drain in a excess commodity war.
Cheap Oil Also Means Cheaper Commodities Amid Surpluses
Dec 9, 2014 12:00 AM GMT
Lower fuel prices are compounding the longest commodity
slump in a generation. Because energy accounts for as much as half the cost to produce food and metals, all sorts of commodities will keep dropping, according to Societe Generale SA and Citigroup Inc. With inventories ample and slowing economies eroding demand, cheaper oil lowers the price floor for mining companies and farmers to remain profitable. Corn may drop another 3 percent, cotton 6.5 percent and gold as much as 5 percent, SocGen estimates.
Costs are falling as surpluses emerge in copper and sugar and as the economy slows in China, the top consumer of energy, metals, pork and soybeans. The Bloomberg Commodity Index of 22 items is heading for a fourth straight annual drop, the longest slump since its inception in 1991. Brent crude, gasoline and heating oil are the biggest losers as an increase in U.S. drilling led to a price war with producers in OPEC.
“There’s been a structural change in oil, and there’s more to come,” said Michael Haigh, the head of commodities research at Paris-based SocGen. “This will also ripple through other commodity markets, in some cases directly, and others indirectly.”
Brent crude, the international benchmark, has tumbled 41 percent since the end of June to $66.19 a barrel as U.S. output jumped to a three-decade high. The price yesterday touched $65.93, the lowest since October 2009. The Bloomberg Commodity Index fell 12 percent this year. The MSCI All-Country World Index of equities gained 3.2 percent, while the Bloomberg Dollar Spot Index climbed 9.9 percent.
More
In central banking as in diplomacy,
style, conservative tailoring, and an easy association with the affluent count
greatly and results far much less.
J. K. Galbraith.
At the Comex silver
depositories Monday final figures were: Registered 64.48 Moz, Eligible 112.69
Moz, Total 177.17 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
In the Bilderberger worker’s paradise from hell,
will recession for most turn into depression. Neither the euro nor the EUSSR is
working for most anymore. Operating a fiat currency is unstable at best.
Operating a one size fits all German fiat currency union, for the feckless of
southern Europe, in a US imposed suicidal sanctions war with Russia, is
outright madness.
Below, setting up the end for next year.
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
Euro zone warning hits stocks, currency as oil plumbs depths
By John Geddie LONDON
Reuters) - European stocks and the
euro felt the effects on Monday of a stark warning about the currency bloc's
economic prospects, keeping pressure on rock-bottom oil prices following weak
data from Asia.ECB policymaker Ewald Nowotny's warning of a "massive weakening" of the economy followed a rating downgrade in the bloc's third largest economy Italy, buoying bond markets as investors positioned for a fresh round of central bank stimulus.
Europe's index of top shares, the FTSEurofirst, dipped 0.6 percent, as weakening Chinese trade and data showing Japan's recession to be deeper than initially expected fed global growth fears.
----But the dollar was robust, extending gains after Friday's strong U.S. labor data to weigh on oil prices already crushed by predictions that oversupply would keep building until next year. Brent crude fell to a five-year low [O/R].
Italian government bond markets suffered, with yields shooting higher after S&P downgraded the country's credit rating to just one notch above junk on Friday, underscoring the limited progress made under Prime Minister Matteo Renzi's economic reforms. [GVD/EUR]
But all other euro zone borrowing costs fell, with benchmark German yields hitting a day's low after Nowotny said the bloc's tepid recovery had pushed the European Central Bank to look more closely at a sovereign bond quantitative easing program.
"Nowotny's comments have just reinforced the market's view that the ECB is inching towards outright QE, we think probably in January," said Lee Hardman, a strategist with Bank of Tokyo-Mitsubishi UFJ in London.
The gathering strength of the dollar, against which the euro fell 0.2 percent to a 2-1/2-year low, also weighed heavily on emerging markets on Monday.
More
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
The monthly Coppock Indicators finished November.
DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.
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