Baltic Dry Index. 632 -34 Brent Crude 49.14
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
There can be few
fields of human endeavour in which history counts for so little as in the world
of finance. Past experience, to the extent that it is part of memory at all, is
dismissed as the primitive refuge of those who do not have the insight to
appreciate the incredible wonders of the present.
J. K. Galbraith.
The coming weekend will all be about the media spin of Sparta v Berlin,
and the growing global appreciation of what the end of the commodity “super cycle”
i.e. bubble, means for the great
unwashed global masses. Despite global stock markets fuelled by central
bankster QE and ZIRP, both developments are hardly likely to be good for the
global economy. Yes lower oil prices will transfer spendable cash from relatively
few energy producers to masses of worldwide energy consumers, but net net, it’s
only the same amount of spending getting redistributed. In the EUSSR David v
Goliath fight, it’s highly improbable Sparta’s David has a slingshot that takes
out Berlin’s vengeful Goliath. If Sparta’s David wins, all of Club Med will want
the same deal. Dead beats from South America to Africa will all want an invite
to the free lunch. If the EUSSR crushes the vote of the Greek democracy, just
watch the unstoppable rise of the anti EUSSR parties. The elitist Bilderberger,
wealth and job destroying, euro, anti US dollar project, has backed itself into
a corner of its own making. This weekend promises to bring on high rhetoric.
But first we must get through the last trading day of January 2015. The
central banksters are in danger of losing control of their Great Stock Market
Bubble. The Fed’s talking chair must order the Fedster’s NYC Plunge Protection
Team to follow up on yesterday’s rally. Any failure today threatens Armageddon
for stocks next week. It’s a good time to be sitting in the shell shocked Swiss
National Bank bunker. This is what passes for capitalism 21st
century style in the end phase of the Great Nixonian Error of fiat money. We
all know how it ends, just not when or why. Stay long fully paid up physical
precious metals held outside of the larcenous reach of Uncle Scam and John
Bull. They have form, as they used to say at all too often bent Scotland Yard.
“The boom can last only as long as the
credit expansion progresses at an ever-accelerated pace. The boom comes to an
end as soon as additional quantities of fiduciary media are no longer thrown
upon the loan market...”
“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
Investors have woken up to Greece's nuclear risk
European and international authorities are facing a revolt from the Greek new prime minister, Alexis Tsipras
Markets have woken up to Greek
nuclear risk. Bank stocks on the Athens exchange have crashed 44pc since Alexis
Tsipras swept into power this week with a mandate to defy the European power
structure.
Greek bonds bought with such zest
by investors last April - entranced by the mirage of recovery, and deaf to
simmering revolution below - are signalling a rapid slide towards bankruptcy.
Five year yields spiked to 13.5pc today.
Contrary to expectations, Mr
Tsipras has not resiled from a long list of campaign pledges that breach the
terms of Greece's EU-IMF Troika Memorandum, and therefore put the country on a
collision course with the Brussels, Berlin, and Frankfurt.
----If
anything, he is upping the ante. He could have gone in into coalition with the
centrist, pro-EU Potami party, and could have explained any softening of his
line towards Europe as a necessary move to hold the government together.
Instead he chose to go with Independent Greeks, a nationalist party that is
even more virulently hostile to the Troika. This has been a cannon shot across
the bows of creditor states.
----“We will immediately stop any privatisation,” said Panagiotis Lafazanis, leader of the Marxist Left Platform, the biggest bloc in the Syriza pantheon. Plans to sell the PPT power utility and the Piraeus Port Authority have been halted. The minimum wage will be raised from €500 to €751 a month as a first order business. This is an explicit rejection of Troika austerity terms.
We are witnessing a democratic
revolution. Never before have the EMU elites had to face a eurozone government
that refuses to play by any of their rules, and they have yet to experience the
lascerating tongue of Yanis Varoufakis, a relentless critic of their 1930s
ideology of debt-deflation and "fiscal waterboarding".
Mr Varoufakis told me before his
appointment as finance minister that Syriza will not capitulate even if the
European Central Bank threatens to cut off €54bn of liquidity for the Greek
banking system, a move that would almost certainly force Greece to nationalise
the banks, impose capital controls, and would - in my view, though not in his -
force it to reintroduce the drachma within days.
"A freshly elected
government cannot allow itself to be intimidated by threats of
Armageddon," he said. His first act in office today was to announce that
600 cleaners in the finance ministry will regain their jobs, paid for by
cutting financial advisers. The corridors erupted in cheers.
----Yes, successive governments lied about the true state of public finances in the years leading up to the crisis, but this is a distraction in macro-economic terms. The flood of French, German, Dutch, and Anglo-Saxon capital into Greece was so vast that the drama would have unfolded in much same way even if Greek politicians had been angels.
The greater lie was the silent
complicity of all the relevant players in allowing the deformed structure of
monetary union to incubate disaster. Surveillance reports by EU bodies in did
not sound the alarm during the boom years, though one of the authors told me at
clandestine lunches in Brussels that the whole of southern Europe was heading
for disaster. Internal critics were silenced.
What has happened to Greece since
then is a moral scandal. Leaked documents from the IMF Board confirm that
country needed debt relief at the outset. This was blocked by the EU for fear
that it would set off contagion at a time when the eurozone - negligently - did
not have a lender-of-last resort. Greece was sacrificed to buy time for the
euro.
The EU-IMF Troika forced a
bankrupt country to take on further loan packages, allowing foreign banks to
dump their bonds onto Greek taxpayers and trap Greek citizens in debt
servitude. To add insult to injury, this was called a rescue.
More
Germany succumbs to Europe’s deflationary crisis
The euro area's economic titan has joined the rest of the currency bloc, and has entered deflation in January, for the first time since October 2009
Germany has succumbed to
deflation for the first time in more than five years, and may not see inflation
again until the final quarter of this year.
Inflation fell below zero for the
first time since October 2009, according to preliminary
estimates from statistics agency Destatis, as prices dropped by 0.3pc in the year to
January.
Analysts had expected deflation -
but not at this pace. A poll suggested that prices would fall by just 0.2pc in
the period. Final results for January will be published on February 12.
There are fears that prices may
continue to fall for some time. Michala Marcussen, of Societe Generale, said:
"German inflation should not turn positive before the final quarter of
2015."
Gizem Kara, an economist at BNP
Paribas, said "A fall in energy prices on the month was a key driver of a
decline in inflation in January." Excluding food and energy, prices rose
by 1.1pc in the year to January.
The negative inflation figures
from Germany made it the latest eurozone country to slip into deflation. Latest
eurozone-wide figures showed prices
slipped by 0.2pc in the year to December in the single currency bloc.
Eurostat is due to publish
inflation figures for the euro area as a whole on Friday. Economists expect
these will show prices have fallen faster still, at 0.5pc in the year to
January.
Fears that the phenomenon could
become entrenched led the European Central Bank (ECB) to announce
a €1.1 trillion (£820bn) quantitative easing scheme in an effort to buoy the ailing
currency bloc.
“Looking ahead, energy effects
are likely to keep German inflation negative for the next six months, but for
now we are not forecasting a prolonged and widespread bout of deflation,”
Jennifer McKeown, of Capital Economics, said.
MoreFed Statement: Not Dovish, Not Hawkish—-Just Gibberish
by David Stockman •
Call it 529 words of gibberish
and be done!
All of the FOMC’s platitudes
about the economy “expanding at a solid pace”, labor market conditions which
have “improved further”, household spending which is “rising moderately” and
business fixed investment which is “expanding” are not
simply untruthful nonsense; they are a smokescreen for the Fed’s actual
intention. Namely, to keep the Wall Street gamblers in free money in the
delusional hope that ever rising stock prices will generate a trickle
down of “wealth effects” in the main street economy.
But in equivocating still another
time about when they intend to get the Fed’s big fat ZIRP thumb off the
money market, the denizens of the Eccles Building have shown their true
colors. The FOMC is not really comprised of economists or central
bankers. It is simply a groupthink posse of spineless cowards who
are petrified of a Wall Street hissy fit—–and are therefore willing to dispense
whatever spurious word clouds they judge may be necessary to keep the
gamblers hitting the “bid” until the next meeting.
After all, how can it
possibly be true that notwithstanding all the “solid” economic advances it
crowed about in the opening paragraph, the Fed still intends to
maintain zero interest rates through mid-year—or for what will be an
out-of-this-world 80 months running? As recently as 10 years ago that
incredulous juxtaposition—-a solid economy coupled with desperate policy
measures—-would have been laughed out of court by even the Fed’s own
economists.
In fact, we don’t have a solid
economy at all, and the halting advances of recent years have absolutely
nothing to do with Fed policy. Instead, the utterly trite
macroeconomic commentary contained in its meeting statements is a form of
Keynesian ritual incantation based on a delusional conceit. Namely, that left
to its own devices the US economy would chronically sink into a recessionary
stupor, and that it is only the deft interventions of the central
bank which nudge the $18 trillion US economy back onto the path toward
full employment and the realization of “potential GDP”.
The very opposite is true. The
Fed has become a serial bubble machine. Its fantastic bouts of money printing
and the resulting destruction of honest price discovery in the financial
markets lead to violent boom and bust cycles in the Wall Street casino—-of
which we have had three since the mid-1990s.
---- So what the Fed’s post-meeting statements describe as policy driven economic “advances” and “improvements” are actually the halting gains that main street workers, businesses and entrepreneurs are able to realize from their own economic efforts. Indeed, the false correlation of natural capitalist recovery with central bank policy intervention has gotten so ritualized and trivialized that yesterday’s crowing about economic recovery is nearly identical to the word clouds the FOMC emitted in 2007 and 1999.
Stated differently, there is no
natural business cycle that the Fed is improving upon. There is only a
destructive and artificial boom-and-bust cycle owing to central
bank policy intervention that pumps the main street economy up
and down over and over again. Accordingly, the only relevant measure of economic
conditions is not the short-run changes which materialize in the recovery
rebound after each financial bust, but the trend rate of change over
time——something that can best be measured on a peak-to-peak basis.
More
It’s official: Alibaba’s stock enters bear market
Published: Jan 29, 2015 5:00 p.m. ET
NEW YORK (MarketWatch) — Alibaba Group’s stock officially entered bear
market territory Thursday, as the Chinese e-commerce giant was rudely awakened
to the Wall Street world of high expectations.The stock BABA, -0.40% tumbled 8.8% to close at a three-month low, and 25% below its highest closing price of $119.15 reached Nov. 10. The stock was down as much as 11% at the intraday low of $87.36.
Many on Wall Street say a bear market begins after a decline of 20% or more from a significant high, without an intervening 20% rise. That means a close at or below $95.32 for Alibaba’s stock would make a bear market official.
Although the company reported better-than-expected fiscal third-quarter earnings, the stock’s tumble comes after revenue missed expectations. A number of other key metrics increased sharply, but at a slower pace than the previous quarter. Here are some examples:
More
"In
economics, hope and faith coexist with great scientific pretension."
J. K.
Galbraith.
At the Comex silver
depositories Thursday final figures were: Registered 66.66 Moz, Eligible 110.96
Moz, Total 177.62 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Today, more on it’s a funny old world in the
corrupt dying days of the Great Nixonian Error of fiat money. Honest trade is
out. Metal bashing, farming, livestock rearing, retailing is sooo 19th
century. Welcome to the wonders of central bankster fiat money Keynesianism.
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.
A Currency Bet Nearly as Certain as Cartel Profits
(Bloomberg) -- There’s a way to make a quick profit thanks to Mexico’s drug cartels. And it’s perfectly legal.It’s a currency trade, of all things, available every day inside Mexico City’s airport, where there’s a gap of about 3 percent between rates offered at dedicated exchange houses and local banks. Dollars bought cheaply from the currency dealers can be deposited at bank windows just a few feet away for a higher rate.
The airport trade is a weird bit of arbitrage created by the unintended consequences of efforts to combat narcotics trafficking in the U.S. and Mexico. Regulations aimed at curbing money laundering have made it so onerous to deposit large amounts of physical dollars in banks that the currency brokers would rather get rid of them at fire-sale prices.
“Churches, political parties, unions, to mention a few, all have this problem -- they get dollars in cash and are stuck with them,” Cesar Tello, the vice president of Mexico’s foreign exchange trade association, said in an interview from the capital. “If you have $100,000 and you can’t bank them, someone will be willing to take them for a price that’s not favorable.”
On Jan. 27, dollars could be bought at the Mexico City airport for 13.85 pesos. Within the same terminal, a bank will buy dollars for 14.3 pesos each. A Bloomberg News reporter used her own funds to purchase $100, then deposited the money into her account for a quick profit of 45 pesos. In the capital, that’s enough to pay for a Corona beer at the local cantina.
The potential for profit is limited. Most banks will only buy dollars from people who already have an account, and Mexico regulations limit dollar deposits to $4,000 a month. Some banks have lower caps or won’t accept U.S. bills at all. Mexicans can open accounts at more than one bank, but based on an average profit in the neighborhood of 3.2 percent, and the trade isn’t going to earn more than about $125 a month per account.
Officials at Mexico’s central bank declined to comment about the exchange-rate discrepancies.
Ivan Aleman, a vice president at Mexico’s financial regulator who heads the department in charge of compliance, said officials are aware of how the regulations are affecting currency brokers and are working on a solution.
According to U.S. authorities, drug trafficking organizations send between $19 billion and $39 billion annually to Mexico from the U.S.
Sergio Espinosa, 36, who manages the Centro Cambiario Scarlett in Terminal 1, said it’s so hard to deposit dollars that he tries to sell and buy the same amount every day.
“As they come in, they go out,” he said in an interview. “We can’t open bank accounts to deposit our dollars because it would be considered money laundering.”
Another wintry weekend, and our
omnipotent central banksters, have very little to show for all of the bubbles, bailouts,
and financialised wars and economies since the madness began in the stock
market crash of October 1987. The one percenters think this is heaven. For the
99 percenters it’s approaching tar and feathers time. Will sanity prevail? Will
borrowing money reprice to favour savours? Will feckless Keynesianism bring on
Utopia? Will the EUSSR go on to infinity and beyond? Will Uncle Scam ever
return to the city built on a hill? No I
don’t thinks so either. Stay long fully paid up precious metals as 40+ years of
malinvestment delusion starts to unwind. Have a great weekend everyone. More financial
madness next week.
Money,
again, has often been a cause of the delusion of the multitudes. Sober nations
have all at once become desperate gamblers, and risked almost their existence
upon the turn of a piece of paper.
Charles
Mackay. Extraordinary Popular Delusions and the Madness of
Crowds
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
