Baltic Dry Index. 827 -11 Brent Crude 61.30
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
When
you want to fool the world, tell the truth.
Count
Otto von Bismarck.
The Fed’s talking chair spoke, and the S&P 500 surged. No doubt
goosed by the NY Fed terrified of the
December stock meltdown and the coming oil patch bust for early next year. This
time round, the Fedster’s message was “muddled.” 2004s “considerable period” had morphed into
2013-2014s “considerable time,” according to Bloomberg, but yesterday the Fed
used the dreaded code word “patient,” last used in 2004 followed 3 months later
by a rate hike. The New York Fed and the Wall Street Squids might be baiting
and switching for the last of the greater fools. An oil bust sinks all ships.
Smart money continues to exit stocks.
Below, the state of our rigged markets this morning. Brent crude has
bounced about 3 dollars from its early week lows. Are the Fedster’s now trying
to rig oil for Mr. Putin and those deeply indebted American frackers?
Never
believe anything in politics until it has been officially denied.
Count
Otto von Bismarck.
Russian Crisis Spillover to U.S. Economy Likely to Be Small, Yellen Says
Dec 17, 2014 8:38 PM GMT
Federal Reserve Chair Janet Yellen said today that she and her colleagues
discussed Russia’s economic
crisis at this week’s policy meeting and agreed it would have little impact on
the U.S. economy. “We discussed what the potential spillovers are to the United States, which could occur both through trade and financial linkages, but these linkages are relatively small,” she said at a press conference after a meeting of the Federal Open Market Committee in Washington.
“U.S. banks’ exposure to Russian residents is really quite small in terms of relative to their capital,” Yellen said. “In terms of the portfolios of U.S. residents, there are Russian securities, but they account for a very small share.”
More
Asian Stocks Rise After S&P 500 Surges on Fed; Oil Swings
Dec 18, 2014 5:08 AM GMT
Asian
stocks climbed, with the regional benchmark index rebounding from an almost
nine-month low, after a Federal Reserve pledge to be patient on interest-rate
increases sent U.S. equities up the most since 2013. Precious metals advanced
and oil swung between gains and losses. The MSCI Asia Pacific Index advanced 0.8 percent by 2:06 p.m. in Tokyo, as Hong Kong’s Hang Seng Index (HSI) climbed from its lowest since May and Japan’s Topix index headed for its biggest gain in a month. Standard & Poor’s 500 Index futures slipped 0.1 percent after the U.S. gauge jumped 2 percent, erasing about half of its December drop. Crude oil traded at $56.41 a barrel in New York. South Korea’s won fell 0.7 percent versus the dollar and China’s yuan was at the weakest since July. Gold climbed 0.6 percent.
More
Yellen Makes It Clear That Fed’s Patience on Rates Has Limits
Dec 18, 2014 1:11 AM GMT
Federal Reserve Chair Janet Yellen restored clarity to the central bank’s monetary policy plans,
saying it was on course to raise interest rates, though not right away, after
officials issued a statement that some Fed-watchers found confusing. Yellen told reporters following a two-day meeting that the Fed is likely to hold rates near zero at least through the first quarter. She also laid out the economic parameters that would need to be met for liftoff to begin later in the year and said that rates probably would be raised gradually thereafter. They may not return to more normal levels until 2017, she added.
“The statement was a bit clumsy, while I thought Yellen was very clear,” said Eric Green, head of U.S. rates and economic research at TD Securities USA in New York, who formerly worked at the New York Fed.
“The second half of the year we are getting higher rates and the market has to price that in.”
----The Fed said it can be “patient” in its approach to raising the benchmark lending rate from a range of zero to 0.25 percent, where it has been since December 2008. At the same time, policy makers said that language was “consistent” with their prior guidance that rates would be held near zero for a “considerable time” after they ended their asset purchases in October.
“The statement was muddled,” said Eisenbeis, who is now vice chairman and chief monetary economist for Cumberland Advisors in Sarasota, Florida.
The reluctance to drop the previous language completely reflects the difficulty the committee is having in moving away from giving time-based guidance on rates and toward letting economic statistics speak for themselves.
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Fed’s Yellen all but rules out rate hike until April at earliest
Published: Dec 17, 2014 3:51 p.m. ET
WASHINGTON (MarketWatch)—Federal
Reserve Chairwoman Janet Yellen on Wednesday all but ruled out an increase in
interest rates until April at the earliest.
Yellen said Fed policy makers
thought it was “unlikely” the economy would show enough vigor to justify the
first rate increase since 2006 “for at least the next couple of meetings.”
Asked how many meetings equals a
couple, Yellen was emphatic: two.
The Fed’s next meeting is in late
January. After that, the Fed does not meet again until March 17-18.
The third meeting of the year
takes place April 28-29, with another strategy session in June.
More
Below,
an alternate take by America’s leading expert.
I’m Not Buying It——Not The Wall Street Rip, Nor The Keynesian Rap
by David Stockman • December 17,
2014
First comes production. Then
comes income. Spending and savings follow. All the rest is debt…….unless
you believe in a magic Keynesian ether called “aggregate demand” and a blatant
stab-in-the-dark called “potential GDP”.
I don’t. So let’s
start with a pretty startling contrast between two bellwether data trends since
the pre-crisis peak in late 2007—debt versus production.
Not surprisingly, we have racked
up a lot more debt—notwithstanding all the phony palaver about
“deleveraging”. In fact, total credit market debt
outstanding—-government, business, household and finance—-is up by 16%
since the last peak—from $50 trillion to $58 trillion. And that 2007 peak,
in turn, was up 80% from the previous peak (2001); and that was up 103%
from the business cycle peak before that (July 1990).
----Moreover, the virtue of the industrial production index is that it is a measure of physical output, not sales dollars which reflect inflation; or if deflated into “real” terms, the data points are not distorted by Washington’s fudging and finagling of the prices indices.
So how are we doing on production
of things the American economy consumes day-in-and-day out? Well, at
the most recent data point for November, production had soared…….all the
way back to where it was in January 2003!
That’s right. Domestic output of
food and beverages, paper, chemicals, plastics, textiles and finished
energy products (e.g. gasoline), to name just a few, has experienced
no net growth for nearly 11 years.
----Thus, during the peak-to-peak cycle between 2000 and 2007, industrial production was reported to have generated a modest 1.5% per year growth rate. But that was almost entirely accounted for by construction materials and defense equipment. Production of non-durable manufactured goods during that period, by contrast, expanded at just a 0.2% annual rate.
But, alas, defense
production inherently destroyers economic wealth, whether it provides for
the national security or not. And the housing and commercial real estate
construction boom did not add to permanent output growth and wealth at
all; it amounted to a bubble round trip that has gone nowhere on a net
basis during the last 11 years. And the graph below which documents this
truth is in nominal terms, meaning that real private construction spending for
residential housing, offices, retail and other commercial facilities
actually declined by 10-15% after inflation during that period.
Stated differently, bubble
finance does not create growth; it funds phony booms that end up as
destructive round trips.
Yet, here we are
again. The graph below reflects production of oil and gas, coal and other
mining products including iron ore and copper. It has soared by 35% since the
2007 peak, and accounts for virtually all of the gain in industrial production
ex-utilities over the last seven years.
Yet the plain
fact is, the above explosion of mainly oil and gas production
did not reflect the natural economics of the free market, and certainly no
technological innovation called “fracking”. The later wasn’t a miracle; it
was just a standard oilfield production technique that was long known
to the industry, if not to CNBC. It became artificially economic during recent
years only due to the massive and continuous distortions of both commodity
prices and capital costs caused by the world’s central bankers.
More
Elsewhere, China is about to start dumping NSA tainted USA technology.
Who needs “backdoor” rigged Microsoft, Intel, Cisco, Apple and Google, when
local Chinese technology is more secure.
In unintended consequences, the NSA just generated a new Chinese
technology industry. It’s a funny old world in our new lawless age. Now Uncle
Scam is about to buddy up with communist Cuba.
China is Planning to Purge Foreign Technology and Replace With Homegrown Suppliers
Dec 18, 2014 2:50 AM GMT
China is aiming to purge
most foreign technology from banks, the military, state-owned enterprises and
key government agencies by 2020, stepping up efforts to shift to Chinese
suppliers, according to people familiar with the effort. The push comes after a test of domestic alternatives in the northeastern city of Siping that was deemed a success, said the people, who asked not to be named because the details aren’t public. Workers there replaced Microsoft Corp.’s (MSFT) Windows with a homegrown operating system called NeoKylin and swapped foreign servers for ones made by China’s Inspur Group Ltd., they said.
The plan for changes in four segments of the economy is driven by national security concerns and marks an increasingly determined move away from foreign suppliers under President Xi Jinping, the people said. The campaign could have lasting consequences for U.S. companies including Cisco Systems Inc. (CSCO), International Business Machines Corp. (IBM), Intel Corp. (INTC) and Hewlett-Packard Co.
“The shift is real,” said Charlie Dai, a Beijing-based analyst for Forrester Research Inc. “We have seen emerging cases of replacing foreign products at all layers from application, middleware down to the infrastructure software and hardware.”
China
is moving to bolster its technology sector after Edward Snowden revealed
widespread spying by the U.S. National Security Agency and accused the
intelligence service of hacking into the computers of Tsinghua University, one of the
China’s top research centers. In February, Xi called for faster development of the industry
at the first meeting of his Internet security panel.
More
We end with the dying EUSSR. Greece takes the lead again from Great
Britain in the rush to the door marked EU exit.
Greece Fails to Gather Support to Elect New President
Dec 17,
2014 10:01 PM GMT
Greece moved a step closer
to early elections after Prime Minister Antonis Samaras failed to gather enough
support for his nominee in a parliamentary vote for a new head of state. In voting in Athens yesterday, 160 lawmakers in Greece’s 300-seat chamber backed Samaras’s candidate for the presidency, Stavros Dimas, short of the 200 votes required in the first of three attempts this month. Samaras has 155 lawmakers in his governing coalition and failure to rally enough support for Dimas will lead to the dissolution of parliament.
---
Attention now turns to the second vote on Dec. 23, when Samaras again needs a
two-thirds majority to win. If he fails in the third attempt, set for Dec. 29,
parliament is dissolved and early elections will be called.
---- With polls putting anti-austerity opposition party Syriza ahead of Samaras’s New Democracy, the prospect of early parliamentary elections has roiled financial markets in Greece, evoking memories of the height of the financial crisis in 2012 when the country’s euro membership was in jeopardy.
“The government’s scaremongering was unsuccessful,” Syriza leader Alexis Tsipras told reporters. Those comments were echoed by Panos Kammenos, head of the opposition Independent Greeks party, who said the “operation to terrorize lawmakers” had failed. Fotis Kouvelis, leader of Democratic Left, said the result “opens the road for new elections.”
More
All
treaties between great states cease to be binding when they come in conflict
with the struggle for existence.
Count
Otto von Bismarck.
At the Comex silver
depositories Wednesday final figures were: Registered 64.59 Moz, Eligible 110.82
Moz, Total 175.41 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Below, the reality of the spreading oil bust. Buy
the dips of course. This time its different.
People
never lie so much as after a hunt, during a war or before an election.
Count
Otto von Bismarck.
Loan Gains Erased With Debt Headed for First Loss Since 2008
Dec 16, 2014 9:28 PM GMT
Gains on loans made to riskier U.S. companies have been wiped out for the
year and the debt is on track to post its first annual loss since 2008. The debt has dropped 0.79 percent, with declines this month erasing annual returns that were as high as 2.6 percent in July, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index. Returns were 5 percent last year.
The debt is tumbling along with junk bonds as the plunge in oil prices is making it harder for riskier companies to raise debt. Investors pulled $1.05 billion from loan funds and $1.89 billion from high-yield bond funds last week in the U.S., according to Lipper.
The retreat has reduced speculative-grade bond returns for the year to 0.36 percent through Dec. 15, according to a Bank of America Merrill Lynch index. The debt gained 7.4 percent in 2013.
http://www.bloomberg.com/news/2014-12-16/loan-gains-erased-with-debt-on-track-for-first-loss-since-2008.html
Politics is not an exact science.
Count
Otto von Bismarck.
The monthly Coppock Indicators finished November.
DJIA: +136 Down. NASDAQ: +262 Down. SP500: +204 Down.
Confusing Coppock Indicators. In my world "+" before an index has always meant Up not Down.
ReplyDeleteGG