Baltic Dry Index. 739 -02 Brent Crude 48.78
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
"If
you bet on a horse that's gambling. If you bet you can make three spades,
that's entertainment. If you bet cotton will go up three points, that's
business. See the difference."
Mario
Draghi, with apologies to Blackie Sherrord, gambler.
Will the ECB bet on red or black on Thursday? But first
this on the continuing global slowdown. The oil slump looks likely now to
continue down to the high 20s.
IMF Lowers Global Growth Forecast by Most in Three Years
Jan 20, 2015 5:07 AM GMT
The IMF made the steepest cut to its global-growth outlook in three years,
with diminished expectations almost everywhere except the U.S. more than
offsetting the boost to expansion from lower oil prices. The world economy will grow 3.5 percent in 2015, down from the 3.8 percent pace projected in October, the International Monetary Fund said in its quarterly global outlook released late Monday in Washington. The Washington-based lender also cut its estimate for growth next year to 3.7 percent, compared with 4 percent in October.
The weakness, along with prolonged below-target inflation, is challenging policy makers across Europe and Asia to come up with fresh ways to stimulate demand more than six years after the global financial crisis. Central bankers and government officials including Bank of England Governor Mark Carney and the Bank of Japan’s Haruhiko Kuroda may talk about options when they convene this week at the World Economic Forum’s annual meeting in Davos, Switzerland.
“The world economy is facing strong and complex cross currents,” Olivier Blanchard, the IMF’s chief economist, said in the text of remarks at a press briefing Tuesday in Beijing. “On the one hand, major economies are benefiting from the decline in the price of oil. On the other, in many parts of the world, lower long-run prospects adversely affect demand, resulting in a strong undertow.”
More
Chinese Growth at 7.4% Is the Slowest Since 1990
Jan 20, 2015 3:34 AM GMT
China’s stimulus efforts
began kicking in late last year, boosting industrial production and retail
sales, and helping full-year economic growth come close to the government’s
target. The yuan
and local stocks rose. Gross domestic product rose 7.3 percent in the three months through December from a year earlier, compared with the median estimate of 7.2 percent in a Bloomberg News survey. GDP expanded 7.4 percent in 2014, the slowest pace since 1990 and in line with the government’s target of about 7.5 percent.
More
More QE will not help the world, says Mervyn King
Former Bank of England governor we should "worry" persistent weakness in the global economy
By Reuters 12:10AM GMT 20 Jan
2015
More monetary stimulus will not
help the world economy return to strong growth, former Bank of England governor
Mervyn King said, days before the European Central Bank is expected to decide
whether to embark on a massive bond-buying programme.
In his first public speech in
England since his term at the BoE ended in June 2013, Mr King said he was
concerned about a persistent weakness in global economic demand, six years on
from the depths of the financial crisis.
"We should worry about
that," Mr King told an audience at the London School of Economics, where
he was once a professor.
"We have had the biggest
monetary stimulus that the world must have ever seen, and we still have not
solved the problem of weak demand. The idea that monetary stimulus after six
years ... is the answer doesn't seem (right) to me," he added.
Unlike the US Federal Reserve and
the Bank of England, the European Central Bank has until now resisted trying to
boost the economy by buying government bonds with newly created money, known as
quantitative easing (QE).
But
months of sub-zero inflation in the eurozone mean that many economists now
expect the ECB to announce this step after its first policy meeting of 2015
ends on Thursday.
More
Now back to red or black. With just two days to go for the ECB to save
the EUSSR, will ex-Goldmanite Draghi, go for Black or Red on the ECB’s roulette
wheel? Will their QE bet be red, the
unlimited nuclear option of “whatever it takes,” German paymasters and courts
be damned, or will it be black, the usual ECB and European limited option, QE
lite, and timid, timid, fudge and punt. If not safely out of the markets and
down in the bunker alongside the SNB, you place your bet, and hope to have bet
right when the markets assess the outcome on Thursday, and what it might mean
for Greek voters on Sunday. This time round, the one-percenters gathered in 4
star Davos, are just minor extras, looking for another bailout if they bet red
and Draghi bets black.
Such is the latest iteration of what passes for casino capitalism in
2015. Little wonder that last week the SNB took its money off the table, took
its losses and headed off to the bunker. Seemingly did so in a deliberate way
that paid back Uncle Scam’s US banks and FX gangsters, payback for Uncle Scam’s
unrelenting attacks and massive fines on the Swizz banking system. There’s no
loyalty among thieves anymore as the SS Euro looks like getting sunk by the
Anglo-Americans.
Euro Back in Davos Focus as First ECB Then Greece Decides
Jan 19, 2015 11:50 AM GMT
The euro-area economy is back in the cross-hairs of investors. It’s a familiar place for the currency bloc, which spent the past five years struggling for growth, the faith of investors and even its very existence. The latest concerns, that failure to break political logjams dumps the region back into recession and crisis, are propelling the continent back up the worry list of investors, executives and policy makers heading to the World Economic Forum’s annual meeting in Davos.
A Greek election in six days may hand a slice of power to a party gunning to renegotiate the austerity on which the nation’s bailout is based, potentially serving as a preview for votes in Portugal and Spain and reviving talk of a euro exit.
Meantime, European Central Bank President Mario Draghi, the man who defused the turmoil in 2012, is trying to craft the cross-border consensus needed for full-blown quantitative easing as the threat of deflation hovers over the region and governments resist overtures to do more.
“The politics of Europe is so much more problematic even though the economics look better,” says Ian Bremmer, founder and president of the New York-based Eurasia Group. “Everywhere you look politically, bottom up, inside out, outside in, Europe is bad this year.”
----The idea that a Greek exit would be manageable “is a dangerous game to play,” said Laura Tyson, a professor at the University of California, Berkeley, and a former adviser to U.S. President Bill Clinton.
Even if Greece stays, the rejection of the traditional political class could still spread. While bailed-out Portugal holds an election in October, it is Spain that’s drawing concern from investors.
Home to the euro region’s second-highest unemployment rate at 24 percent, it votes at year’s end with the Podemos party outpolling rivals on promises to increase public spending and impose losses on the holders of about 1 trillion euros of government debt.
“These elections could show a shift with respect to European integration as the electoral balance between the centre-right and the center-left is abandoned in favor of new ‘protest’ parties,” said Elga Bartsch, chief European economist at Morgan Stanley in London.
----Meantime, Italian Prime Minister Matteo Renzi faces pressure to revive an economy set to shrink for a third year in 2014. Renzi, who will meet Merkel this week, must also find a new Italian president, a position whose clout grew during the debt crisis because of the head of state’s role as a mediator in the country’s politics.
For Anne Richards, chief
investment officer at Aberdeen Asset Management Plc, electoral anger comes
after Europe dodged it on the streets at the height of its debt turmoil.
“It took time for the economic
pain to see its way through to the ballot box,” said Richards. “We’re on the
cusp of another financial crisis.”
More
Not Even Mario Draghi Can Save Europe Now
Jan 19, 2015 5:00 AM
EST By The Editors
The actions that the European Central Bank will finally announce this week
won't give the continent the boost it needs. That's for several reasons, but
the main one hasn't changed: The European Union's system of economic governance
is broken. What's remarkable is that Europe's governments haven't even begun to
confront this larger issue.After months of slowly escalating hints, understandings, analyses and preparations -- with inflation trending down all the while, most recently to less than zero -- ECB President Mario Draghi has no choice but to reveal some kind of quantitative easing program this week. The policy has been widely anticipated and priced into markets. If the central bank does nothing, reactions will be ugly.
Something pretty substantial will be needed just to avoid that. Yet precisely because a moderately sized QE program is expected -- of, say, 500 billion euros -- its arrival won't have much further effect. To deliver the necessary stimulus, the ECB needs to surprise financial markets with a bigger-than-expected announcement.
How could Draghi do that? A program of 1 trillion euros instead of 500 billion, for example, would be mildly surprising, and therefore mildly helpful. Far more surprising, and therefore much better, would be a program unlimited in scale and duration -- whatever it took, as he might put it, to push euro-area inflation back up to 2 percent.
Suppose Draghi decided, as he should, to go for outright shock and awe. Then he could add that the ECB would not regard its 2 percent inflation target as a ceiling so long as demand in Europe was insufficient. He could call on governments to increase their borrowing and tell them that the ECB would buy the new debt directly, in a coordinated monetary and fiscal expansion. He could say that monetary policy, as he understands it, includes the option of "helicopter money" -- and that the bank would shortly begin sending out checks to every EU citizen.
The problem is that the ECB has shown, again and again, that it is temperamentally and institutionally timid. These more radical proposals would divide its policy-making board and court political controversy, to put it mildly. They may also be illegal: The single-currency treaty forbids "monetary financing" of governments, and last week's guidance from the EU Court of Justice's advocate general was that sovereign debt purchases were sometimes permissible but subject to conditions. The guidance seemed to rule out coordinated monetary and fiscal expansion (through primary-market bond purchases); it voiced reservations about the bank's retaining bonds to maturity (imposing a limit on the duration of QE).
More
Draghi Asset-Backed Bond Stimulus Seen Choked by Red Tape
Jan 19, 2015 8:26 AM GMT
Mario Draghi’s plan
to stimulate Europe’s economy
by buying asset-backed securities is underwhelming investors, with purchases
bogged down by bureaucracy and paperwork. Since the European Central Bank president started the program seven weeks ago, 1.8 billion euros ($2.1 billion) of debt has been acquired. At this pace it will take eight years to reach even one tenth of his 1 trillion-euro target for balance sheet expansion.
The reason for the slow progress is that it takes as long as five days for ECB officials to approve purchases and asset managers hired to buy the debt are required to compile lengthy documents detailing the investment case for each bond. It’s fueling speculation Draghi will initiate a quantitative easing program buying government bonds when the bank’s Governing Council meets on Thursday in Frankfurt.
“The
lengthy and drawn-out approval process has made the purchase program slower and
much less effective than it could be,” said Tracy Chen, a Philadelphia-based
money manager at Brandywine Global Investment Management, which oversees $60
billion of assets, including European ABS.
(LMAMX)
“The lack of aggression is disappointing.”
More
The
bankster in his mansion,
The
taxpayer at his gate,
Draghi
made them High or lowly,
He disordered
their estate.
With
apologies to All things bright and beautiful.
At the Comex silver
depositories Monday final figures were: Registered 66.31 Moz, Eligible 108.12
Moz, Total 174.43 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled
over.
Following the SNB’s virtually forced decision last
week to dump the 1.20 euro peg, today we ask are Poland’s banks or Poland
itself, about to become the next gambling “victim” to come crashing out of the
trees and down to earth. Poland has picked on hell of a bad time to start
engaging a US lead trade war with Russia. Unlike Uncle Scam and John Bull, who
have virtually nothing trade-wise to lose, Poland has economically much to lose
by getting involved in other people’s fights.
Swiss Upending Polish Mortgages Unnerves Bank Bondholders
Jan 19, 2015 10:25 AM GMT
Among the victims of last week’s shock surge in the Swiss franc are bond
investors in Polish banks, which hold $35 billion in mortgages denominated in
the currency. Yields on Eurobonds for lenders including PKO Bank Polski SA and MBank SA jumped to five- and nine-month highs after the Swiss National Bank unexpectedly ditched its currency cap. The move sent the zloty tumbling against the franc on concern more Poles will fall behind on repaying franc-denominated home loans.
JPMorgan Chase & Co. said the nation’s banks may need to make additional provisions for non-performing mortgages in the currency, whose value is equivalent to 6.7 percent of gross domestic product, data compiled by Bloomberg show. While the zloty plunged 20 percent against the franc following the SNB action, Polish lenders have adequate capital to withstand a drop of more than twice that, the financial markets regulator said last week, citing results of October stress tests.
“This is clearly negative and increases the risks in the banking sector, which may or may not materialize,” Marta Jezewska-Wasilewska, an analyst at Wood & Co., wrote in a research note Jan. 15. “Polish banks have managed to deal with the FX mortgage issue relatively well since 2008.”
The yield on PKO’s 2019 euro-denominated bonds rose 40 basis points in the last three days to 1.56 percent, the highest since Aug. 22. The rate on similar-maturity MBank debt soared 83 basis points to 2.34 percent in the same period.
The currency swing pushed banking stocks on the Warsaw Stock Exchange down by the most in more than three years, with Getin Noble Bank SA, owned by billionaire Leszek Czarnecki, leading declines after a 16 percent drop on Jan. 15.
Getin’s Swiss-franc loans accounted for “slightly” above 20 percent of total loans at the end of last year, spokesman Wojciech Sury said in an e-mail last week. The bank sees no threat its liquidity levels will fall below the required minimum and is “ready for different scenarios,” he said.
Getin and BNP Paribas Bank Polska SA were the only two Polish banks that failed the October tests. They both have already made up for a shortfall in capital.
The proportion of bad loans to total franc mortgages swelled to 3.1 percent in November last year from below 1 percent in 2009, according to data from the financial markets regulator, known as KNF.
That compares with a 3.6 percent ratio for zloty home loans and 13.2 percent for consumer loans.
KNF’s October tests showed a 50 percent weakening of the zloty against the franc would cut local banks’ aggregate capital-adequacy ratio by 106 basis points to 13.56 percent, compared with the minimum required level of 12 percent.
A “significant” increase of risk in the banking industry was “prevented by the Swiss central bank’s decision to cut interest rates by 50 basis points,” KNF said in a statement on its website Jan. 15.
Borrowers’ solvency may be at risk if the zloty stays close to 5 against the franc, PKO’s head of strategy, Pawel Borys, said last week.
MBank, which has about 30 percent of all loans in the Swiss currency, expects the zloty to stabilize at about 4 against the franc, Chief Executive Officer Cezary Stypulkowski said on the day of the SNB decision.
The zloty’s meltdown was mirrored by the forint, which lost 19 percent versus the franc on Jan. 15. Banks in Hungary may be less affected as the government last year ordered $14 billion of foreign-currency household mortgages to be converted into forint, reducing their exposure to currency swings.
With Polish parliamentary and presidential elections scheduled for this year, some analysts said there may be a risk similar measures will be applied in Poland.
“The situation of foreign-currency borrowers can be used as a political tool,” Jaromir Szortyka, Warsaw-based analyst at PKO’s brokerage, wrote in a note last week.
Poland’s biggest opposition party, Law & Justice, said Jan. 16 citizens should be able to apply to get their Swiss-franc mortgages fixed at the exchange rate before the SNB decision.
More
"Sooner or later both the Greek population and international creditors will tire of fighting a losing battle, leading to a break-up of the currency union as Greece pulls out, probably followed by other countries"
Douglas McWilliams, chief executive of the Centre of Economics and Business Research.
The monthly Coppock Indicators finished December.
DJIA: +138 Up. NASDAQ:
+247 Down. SP500: +198 Down.
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