Tuesday, September 4, 2012

June Foodstamp Recipients Hit All Time High As Three Times As Many Americans Enter Poverty As Find Jobs

Following a brief period in which it seemed that US foodstamp recipients may have peaked, with those living in poverty maxing out at 46.514 million in December 2011, and then declining modestly for the next few months, June saw a new surge in those Americans living in poverty and thus eligible for foodstamps, with 173,600 new entrants into the system, bringing the total to a new all time high of 46.670 million and once again rising fast. Furthermore, with subsequent emergency events affecting the heartland due to the drought, the administration has made sure even more Americans will be eligible going forward. As a result expect the July and August numbers to promptly surpass 47 million on their way to the psychological resistance level of 50 million. Indicatively, the 173,600 increase in Foodstamps recipients in June was three times greater than Americans finding jobs (64,000, most of which part-time) according to the BLS. Finally, a new record was also breached for American households on foodstamps, which now hit 22.4 million, an increase of 106,298 households. The average benefit per household decline once more, this time to $276.5. Not an all time low, but just above it.

Manufacturing ISM Misses, Third Month In Contraction Territory; Biggest Miss In Construction Spending In One year

  So much for the transitory bounce in positive economic reports from August. While hopes were high that maybe, just maybe, the virtuous cycle has once again been restored and the Fed's intervention would be unneeded, the August Manufacturing ISM just printed at 49.6, down from July's 49.8, and well below expectations of 50. This was the third contraction in a row and joins the global PMI which as we reported yesterday now has 80% of the world in contractionary territory. The kicker was the Prices Paid category which soared to 54.0 from 39.5, a whopping 14.5 surge, which together with the always hollow Inventories category which rose from 49.0 to 53.0, and Employment, which dipped from 52.0 to 51.6, were the only categories in the 50+ region. Everything else is now contracting. And in other news, Construction spending (remember "housing has bottomed") plunged from 0.4% to -0.9%, on expectations of an unchanged print, which was the biggest miss in a year, and the biggest drop in also a year.

Nomura: "Spain Will Need Full-Blown Bailout"

While hardly saying anything new, more and more pundits are waking up to the reality that faced with an environment of epic capital outflows predicated by a complete loss in the system (see Greece), Spain simply can not survive. We wrote about the record outflow in Spanish deposits last week (here and here) and the fact that with banks urgently seeking to plug liquidity holes, coupled with soaring NPL levels, in the absence of actual profits they are forced to sell all those SPG bonds they had been purchasing during the open ponzi phase, where ECB funding would be recycled by local banks to meet primary market demand. Overnight even the New York Times has finally understood this simple identity: record outflows = the end. And now, the banks begin to chime in, pointing out what is patently obvious: from Nomura - "Spain will need full-blown bailout which will include more active role of ECB in Spanish bond markets."

As The Iron Anvil Falls, Will Australia Be Stuck Below It?

Iron ore prices, which have fallen by 24% in the past month, have been front and center in our views on the China debacle recently. Following the RBA's decision not to cut rates last night we thought Macquarie's recent insight into just how bad an impact a sustained weakness in demand could have on the Australian economy was worthwhile, as hope seems to remain that the destocking among Chinese steel mills will end at some point and demand will re-emerge phoenix-like (though we strongly suspect not). The relative resilience of the AUD suggests that most investors believe that iron ore prices will recover over the next few months. But if they don’t then this could be the 'Wile E. Coyote moment' for the AUD, as GDP drops 3ppt, unemployment rises 4ppt, and busienss investment is slashed 20% below consensus.

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Federal Reserve: Assets Are Building On Their Balance Sheets

Admin at Jim Rogers Blog - 1 hour ago
I know they are going to print more money. They already are. If you look at their balance sheets, you will see that something is happening, assets are building on their balance sheets and they are not coming from the tooth fairy. So I do not know whether they will announce it or not. They are a little bit embarrassed because they announced QE1 and QE2, and it did not work. So they may try to discuss it. They may just continue to do it without getting egg on their face again, but they are going to print money, they are all going to print money. It is the wrong thing to do, but that i... more » 

The Invisible Hand and Houdini, The Master of Illusion

Eric De Groot at Eric De Groot - 2 hours ago
(1918) "Ladies and gentlemen," Houdini cried as, to the audience's alarm, a full-grown Asian elephant, 8ft tall and weighing over 6,000lb, came running pacily into view. "Allow me to introduce Jennie, the world's only vanishing elephant." Jennie the elephant proudly raised her trunk in greeting to the wide-eyed masses, before being led into a huge, brightly coloured box on wheels. The doors... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

China's manufacturing slump deepens

Eric De Groot at Eric De Groot - 2 hours ago
Chinese stocks continue to lag their US counterparts. As long as this negative divergence exists, it suggests a flight of capital from the periphery to core and economic deterioration. It’s quite possible that the chickens (debt) will come home to roost as early as the summer of 2013. America is not ready. Chart: FTSE China versus S&P 500 Headline: ... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

I Am Short On India

Admin at Jim Rogers Blog - 3 hours ago
India for some reasons gets better press in the reality. I still have not quite figured out the Indian press. The debt to GDP in India is now over 90 percent. Study shows that when you get that high debt ratio, it is very difficult to grow in a dynamic way. I am not a fan of India. In fact, I am short on India. So I do not think you are going to see a lot of good news coming out of India. - *in Economic Times* Related ETFs: WisdomTree India Earnings Fund ETF (EPI) *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured ... more » 

Jackson Hole Meeting: Conditions Will Eventually Warrant More QE

Admin at Marc Faber Blog - 4 hours ago
Basically the Jackson Hole meeting did not produce anything that we investors did not know before. What was basically articulated by the Fed Chairman, Mr. Bernanke, was that if conditions warranted, there will be more QE3 and the conditions will eventually warrant more QEs and there will be QE3. The question is when will it happen and to what extent have equity markets and also property markets in the US already discounted QE3. - *in ET* Related: SPDR SP 500 ETF (NYSE:SPY) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures mar... more » 

Video: Market Update ET (September 2012)

Admin at Marc Faber Blog - 4 hours ago
Latest video interview, The Economic Times Short Summary: Jackson Hole meeting, S&P 500 outlook, central banks, European Stocks valuation; Related: SPDR S&P 500 Index ETF (SPY); *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

The Battle Begins

If the leaks from the European Parliament are to be believed then the lines are being drawn in the sand for quite a fight. The rumor is that Mr. Draghi is going to propose a plan to buy short sovereign debt (0-3 years) without limit if a nation fills out the requisite form and officially asks for aid with conditionality. This once again proves that the rules and regulations in Europe, the very stipulations that we rely upon, can be changed, modified or distorted with the blink of an eye and the wave of a hand. It seems that nothing is set in concrete, nothing is firm and that everything is moveable upon a moment’s notice. the amount of upfront debt, which would constantly have to be rolled, would present a series of dangers including the inability to finance it as it comes due along with a balance sheet at the ECB that could swell well past the $4 trillion mark where it is now or 45% larger than the current balance sheet at the Fed. The world does not receive funding from alien worlds and there are consequences that append from having a ledger that expands without boundaries.

September And November Best Months To Own Gold

Gold’s seasonality is seen in the above charts which show how March, June and October are gold’s weakest months with actual losses being incurred on average in these months. Buying gold during the so-called summer doldrums has been a winning trade for most of the last 34 years. This is especially the case in the last eight years as gold averaged a gain of nearly 14% in just six months after the summer low. We tend to advise a buy and hold strategy for the majority of clients. For those who have a bit more of a risk appetite, an interesting strategy would be to buy at the start of September, sell at end of September and then buy back in on  October 31st.

Chart Of The Day: 803 Years Of Global Inflation

Spot the point in this 803 year timeline of world inflation, when the Fed was created.

Frontrunning: September 4

  • The ESM Violates the Law And EU Treaties (Welt)
  • Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain (NYT)
  • RBA stays put for third straight month (SMH)
  • Why PBOC will not cut rates: China’s Repo Rate Drops Most in Six Months as PBOC Injects Cash (Bloomberg)
  • Manufacturing Downturn Spreads Gloom Across Asia, Europe (WSJ)
  • "Sources" tell Dutch Dagblad that Weidmann is isolated in his objection to ECB monetization (Reuters, FD)
  • Europe Bank Chief Hints at Bond Purchases (WSJ)
  • Australia's Fortescue slashes capex as iron ore mkt drops (Reuters)
  • Loan rates point to eurozone fractures (FT)
  • U.S. nears deal for $1 billion in Egypt debt relief (Reuters)
  • Majority of New Jobs Pay Low Wages, Study Finds (NYT)

Overnight Sentiment: Hoping There Is Hope

Yesterday we dedicated significant space to the most recent piece of perfectly ludicrous propaganda out of the ECB, namely that monetizing debt with a maturity up to three years is not really monetization but is instead within the arena of "money market management" (images of Todd Akin defining when something is 'legitimate' and when it isn't swimming our heads). The implication of course is that debt under 3 years is not really debt, but some mystical piece of paper that nobody should be held accountable for. Hopefully all those consumers who have short-maturity credit card debt which nonetheless yields 29.95% APR are made aware of this distinction and decide to follow through with Mario Draghi's logic, which is about to take the war of words between Germany and the ECB to the next level. Sure enough, this is precisely the news item that is dominating bond risk markets this morning, if not so much futures, and sending Spanish and Italian 2s10s spreads to record wides on hopes Draghi will definitely announce some sub 3 year monetization program for the PIIGS. Bloomberg summarized this best last night when it commented on the move in the EURUSD, since retraced, that we now have speculation Draghi's move will bolster confidence.  In other words: the market is now hoping there is hope. Sure enough, even if Draghi follows through, for the ECB to monetize Spanish bonds, Spain still has to demand a bailout, which however is now absolutely out of the question as mere jawboning has moved the entire highly illiquid curve so steep Rajoy (and Monti) have absolutely no reason to hand over their resignations (i.e., request a bailout). And so we go back to square one. But logic no longer matters in these markets.

Today’s Items:

Global Manufacturing Update Indicates 80% Of The World Is Now In Contraction
China’s PMI dropped from 50.1 to 49.2. In fact, 80 percent of the world’s manufacturing is in contraction.   Of the countries tracked, only India, South Africa, Russia, and Ireland are still expanding.   Everyone else is in a state of contraction.

What the Economic Crisis Really Means
This animated YouTube video illustrates the history of the current economic crisis, from its design for the start, or the fractional reserve banking system that fuels infinite money creation as debt in a world with finite resources like oil, to the current stupidity of trying to keep the current status quo coming out from banks and governments.   There are alternatives of the current system, that has not eliminated poverty and where people work themselves to death as they deplete the world’s resources.   Work less hours, grow your own food, without going back to the stone age.   Sounds like a better plan than the one Central Bankers and politicians are putting out.

Critical Changes Impacting The Gold & Silver Markets
Egon von Gryerz believes that it is not worth listening to what Benji Bernanke says, but what he does and he will launch a form of QE3 when people do not expect it.   There will only be smaller amounts of orderly money printing on a regular basis, but the real one will come when there is a panic situation.   Right now, there is speculative inflow into gold…   Meaning, they are seeing the writing on the wall that something big is coming down soon.

Silver Gives You More
Ted Butler remains convinced that silver’s multiplier effect will continue to make it one of the best investment assets as it has been overall for the past 10 years.   He believes that it will have a much larger upside than gold in the next 10 years.   When one can now buy about 50 times as much silver, which went above $32 an ounce, as gold, and silver is only coming out of the ground at 10 times the rate of gold, the case of supply and demand will rear its ugly head for those shorting the metal; therefore, after preparing, keep stacking physical.

Student Debt Mal-investment
In 2012, student debt hit the $1 trillion mark, yet college education is not reaping the rewards it once did.   About 1.5 million, or 53.6 percent, of bachelor’s degree-holders under the age of 25 last year were jobless or underemployed, the highest share in at least 11 years.   A crucial factor is that student debt isn’t like other debt — it cannot be discharged simply through bankruptcy.   In getting ahead, it is more important to get the right education and not simply a formal education.

P2P Wireless Internet Network
Government censorship is a primary reason that many want use an alternative to the current internet structure.   Using a peer-to-peer internet, like Netsukuku, the advantages are…
1. It is not resource intensive
2. It is private
3. It is fast.
4. It is open-source
Time to get started folks.

Finally, please prepare now for the escalating economic and social unrest. Good Day!

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