Baltic Dry Index. 516 -06 Brent Crude 62.18
LIR Gold Target in 2019: $30,000. Revised due to QE programs.
“The world is a place that’s gone from being flat to round to crooked.”
Mad Magazine.
We open today with news from the BIS in boring
Basle Swizzerland, of what we already knew. Too many lying, cheating, market
rigging, gambling banksters, are bad for the rest of the real economy. Yet
another unintended consequence of the Great Nixonian Error of fiat money. That
it all goes badly wrong and we all end up like Greece, isn’t in doubt. Price
discovery through honest markets is so pre World War Two. We live now in a
central bankster rigged world of irredeemable fiat money. From crude oil to
gold, from US dollars to Yen, From Washington to Tokyo, everything is now part of
the central bankster’s new age of currency wars headed for disaster.
For now, all news is good news. Eventually though,
as in Greece, all news will be bad news, and central banksterism, and too big
to fail, crony bailouts will be history. Stay long fully paid up physical gold
and silver, held outside of the larcenous reach of John Bull and Uncle Scam.
They both have form, as they say down at the increasingly bent, New Scotland
Yard.
"We finished the year, and we reported that we had $17 billion of cash sitting at the bank's parent company as a liquidity cushion. As the year has gone on, that liquidity cushion has been virtually unchanged."
Bear Stearns CEO Alan Schwartz. March 12, 2008. Bust March 17, 2008
Finance, or why we can't have nice things: James Saft
By James Saft
Feb 17 (Reuters) - It is more than a
coincidence: the growth of finance really is holding the rest of the economy back.Even worse, according to a new paper from the Bank for International Settlements (www.bis.org/publ/work490.pdf), this likely happens in part because we have too many clever bankers who would be producing more of value as aerospace designers or drug researchers.
Good thing then, that we have complex mortgage products to divert us while we are suffering from uncured diseases and not riding in faster, cheaper and quieter jets.
Over the past 35 years or so there has been a clear correlation between the growth of finance, as a share of the economy, and weaker growth in productivity , the measure of how much we create given the resources we put in. While the study looks at data from 15 advanced economies, the U.S. experience is a good illustration. Profits from the financial sector now run at about 20 percent of the whole, about double the level from World War II to the 1970s. By one measure, productivity since 1970 has grown at less than half the 1945-1969 rate, implying a massive shortfall in growth.
That growth in finance has been a drag on productivity, according to the study, while also distorting how resources are invested and what comes out the other end.
"Where skilled labor works in finance, the financial sector grows more quickly at the expense of the real economy. We go on to show that consistent with this theory, financial growth disproportionately harms financially dependent and R&D-intensive industries," Stephen Cecchetti of Brandeis University and Enisse Kharroubi of the BIS write.
Amazing, if not surprising, then, is the way in which the finance industry has attracted and maintained subsidies. Finance benefits massively from the tax-deductibility of debt and through direct and indirect means because of government support in times of stress.
Maintaining these and other subsidies through lobbying and other kinds of suasion is certainly part of how the scads of clever people drawn into the financial industry are deployed.
At the center of the problem seems to be the way in which an overdeveloped financial sector seems to distort the allocation of resources.
In part this is because finance, by its nature, will tend to favor projects with lots of collateral to claim back if things go wrong but with lower prospective results if successful. Real estate development is a good example. Real estate features land and houses to be pledged against loans, making it appear a safer bet than backing the Apple or Tesla of tomorrow. Housing, and other low-productivity sectors, usually win out, according to the study.
This may help to explain why construction-driven booms, like the sub-prime bubble, are often associated with rapid growth in finance. Taking talent into account can magnify the effect, with bankers getting better at making loans and reclaiming collateral but entrepreneurs having less incentive to swing for the fences and hire the best.
Better, in other words, if you are an entrepreneur to gamble with borrowed money while hiring brick-layers than employing Harvard-trained physicists in an aerospace project. That physicist, as we saw in the last boom, becomes a financial engineer instead.
Wall Street’s Calling The Sheep: Buy The Dip Now, Join The Slaughter Later
by David Stockman •
Yes, indeed. They bought the
dip again, nudging the S&P 500 to another “record close”. This time the
magic number was 2097 and its represented a tiny gain of 0.3% from the last
record close, which was 2090 on December 29th.
Needless to say, there were a lot
of thrills and spills in between. As shown below, the broad market index has
been staggering upward like a drunken sailor for the last three months. Just
about 90 days ago on November 17, in fact, the S&P 500 hit a then record
high of 2073 before plunging on five separate occasions by 3-4% toward the 2000
marker during the interim.
So it all adds up to a 1.2%
net gain since mid-November. Call it a 4% annualized rate. The question at
hand, therefore, is who in their right mind would want to play on the jagged
curves shown below for 4% a year?
Indeed, the sharp dips here
pictured are not even half the story. The real risk/reward
equation is the prospect of gaining perhaps 4% when buying the dips
versus a 30-50% bloodbath when comes the next slaughter.
It cannot be said that cheap valuation is what brought the sheep scampering into the Russell 2000 or even the broad market for that matter. The big caps are now trading at 20.4X LTM (latest 12 months) reported earnings, and that in itself is at the tippy-top of the historical range.
In fact, the $102 per share of
earnings for the S&P 500 reported for Q4 thus far represent a
gain of just 17% from the $87 per share of reported LTM earnings back in Q4
2011. During that interval of tepid earnings advance—-aided by massive stock
buybacks with cheap debt and big foreign earnings translation gains owing to a
then weak dollar—-there was nothing at all tepid about the S&P 500 index.
It began Q4 2011 at 1100, meaning that it was up by 90% at the most recent
high.
Can you say multiple expansion?
Big time!
Self-evidently, when the stock
price index rises 5X faster than per share earnings, the PE multiple
must soar. It did—–rising from about 13.5X during the last quarter of
2011 to more than 20X today. Absent the drastic upwelling of animal spirits
embodied in the PE expansion, therefore, the S&P index would be
at only 1375 today. This implies that upwards of 75% of the stock
market gain since late 2011 has been due to multiple expansion alone.
How the European Central Bank could finally pull the trigger on a Grexit
The 'sword of Damocles' is hanging over Greece's banks and the impasse with its creditors could now bring it down for good
Greece's stand-off with its creditors shows little signs of abating.After the latest, unpromising round of talks between the new Greek government and the euro's finance ministers, both parties have hardened their negotiating positions in anticipation of yet another showdown, which is now temporarily penciled in for Friday.
But even before we get to the end of the week, the prospects of a disorderly exit for Greece could be heightened significantly.
On Wednesday, the European Central Bank will have its say on events.
The ECB will be meeting to discuss whether or not it should continue to provide the emergency funds that are helping keep Greece's banks alive.
This Emergency Liquidity Assistance (ELA) is the last remaining link between the country's lenders and the eurozone.
For that very reason, ELA now hangs like the "sword of Damocles" over Greek banks, according to Lorcan Roche Kelly of Bloomberg.
The lenders themselves have no control over whether they will remain eligible for this vital source of assistance. It is the politics that will decide that.
Should no extension of a bail-out agreement be reached before Friday, the plug may well be pulled at the end of the month, effectively dumping Greece out of the euro.
Here's how it all could potentially play out:
Why ELA is so important
In a surprise move earlier this month, the ECB said it would stop accepting Greek bonds as collateral for cheap loans. The decision was taken as Mario Draghi and his colleagues thought the prospects of Syriza reaching a new bailout arrangement with its lenders was pretty slim.
But Greece's banks are still being propped up by ELA, which is designed to help banks facing liquidity problems. Lenders will continue to receive the funds as long as Athens remains in some semblance of a bail-out programme.
The trouble with central banksterism is that eventually you run out of taxpayers money.
With apologies to Margaret Thatcher.
At the Comex silver depositories Tuesday final figures were: Registered 67.85
Moz, Eligible 107.26 Moz, Total 175.11 Moz.
Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Today, more of the madness of the Great Nixonian Error of fiat money,
financialised casino “capitalism,” QE, ZIRP, NIRP, and Wall Street’s exorbitant
privilege. Of course an American company that allows perverts to send each
other pornographic messages that disappear after a few seconds is worth 19
billion, but only in the Great Nixonian error of central bankster fiat money. Under
our present aberrant form of “real” money, thrift, hard work and savings get
crushed, fecklessness, and reckless casino gambling are the only game in town.
"God, no, we don't club baby seals. We club babies."
Goldmanite, quoted in The Times of London. November 8 2009
Snapchat seeks new funding at up to $19 billion valuation: Bloomberg
(Reuters) - Snapchat is looking to raise as much as $500 million in a new funding round that would value the mobile messaging company at up to $19 billion, Bloomberg reported on Tuesday, citing a person with knowledge of the matter.
The latest valuation is a massive increase for the company, which Facebook Inc offered to buy for $3 billion in late 2013. Snapchat's previous funding round, completed late last year, valued the company at more than $10 billion.
Executives of the company, which allows its more than 100 million users to send messages that disappear after a few seconds, are in advanced talks with fund managers, the person told Bloomberg. (bloom.bg/1AiWtif)
The investments being discussed would value Snapchat between $16 billion and $19 billion overall, Bloomberg reported.
----The drastic increase in valuation comes as Snapchat continues to add to its active user base and extends its service. Last month it added videos and articles by mainstream media outlets such as CNN and ESPN, bringing Snapchat into closer competition with Facebook Inc and Twitter Inc.
It is also the latest evidence of
a surge in venture capital financing for technology companies
, that
has produced some eye-popping valuations.
More
“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers.
“They saw the writing on the wall in this market as early as 2005.”
The monthly Coppock Indicators finished January
DJIA: +124 Down. NASDAQ: +220 Down. SP500: +178 Down.
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