Monday, October 22, 2012

German Court Demands Bundesbank Audit Sovereign Gold Holdings

The German court of auditors (Bundesrechnungshof) has demanded that the Bundesbank undertake an audit of its gold reserves.  In an 'audit-the-fed' style effort, the court wants to ensure that the nearly 3400 tons of gold is in fact in existence - 'because stocks have never been checked for authenticity and weight'. Furthermore, the Bundesbank's gold is stored in three other vaults around the world: The Bank of England, The Bank of France, and the US Federal Reserve. The court questions the practice of relying on a written confirmation from the custodians (foreign central banks). The decision means negotiating with the three foreign central banks for physical verification but in anticipation, the Bundesbank has begun the process of shipping 50 tons per year from the Fed back to Germany for the next three years.

Troika Demands All Greek Tax Collectors Be Fired

Usually the Troika is held responsible for all things evil in Europe, but as Die Welt notes, the latest demand that all senior officials at the Ministry of Finance (including all current Greek tax inspectors) be fired by Friday (over corruption and incompetence concerns) has been greeted more positively by many. "The Troika is the only hope to purge this country of the gangs that plunder it - the ONLY hope!" is how one Skai TV commentator summed up the move, adding that "it would be nice if we could read one day that all presiding judges are dismissed." The plan to "collect record amounts of money in record time" involves the interviewing of 2235 new tax investigators (with no written exam!) who will be judged on how much money they bring in (with minimum quotas) and maximum tenure of one year before re-applying. The new plan is likened to 'medieval tax collectors' and the tax-collectors union, unsurprisingly upset at this new plan, added that the Troika never had to face "a destitute pensioner who cannot pay his tax bill." With rumors of government resignation and re-election, the external pressure and internal strife are coming to a head rapidly.

Jim Rogers...I Will Vote The Protest Vote

Admin at Jim Rogers Blog - 6 hours ago
If Mr. Obama wins, his friends are gonna get more money. If Mr. Romney wins, his friends are gonna get more money. But you and I, and everybody watching this show are gonna be worse off because the debt's going to go higher, and the turmoil is gonna get worse. All of them have gotten us into this situation Look at the last 50 years of American history. Republicans, Democrats, Republicans, Democrats .... It's not doing us any good. None of us are benefiting by what's been going on in Washington. I will vote the protest vote. I nearly always vote the protest vote. - *in Business Insid... more »

US Stocks: We Are Going To Go Down 20 Percent

Admin at Marc Faber Blog - 2 hours ago
I think here we’re going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. And I believe that if the statistics were precise – which they aren’t – (…) I think there’s hardly any growth. - *in CNBC * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Reduce Government By Minimum 50 Percent

Admin at Marc Faber Blog - 2 hours ago
My medicine for the U.S. is: Reduce government by minimum 50 percent. The impact would be immediately an improvement in the economy. -* in CNBC* Related: SPDR SP 500 ETF (SPY), iShares Barclays 20+ Year Treasury Bond ETF (TLT) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 
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Debt A Threat To National Interests

Eric De Groot at Eric De Groot - 2 hours ago
Debt, a threat to national interests positioned as security below, is the main reason why QE will be infinite and investors expecting a massive D-wave decline after the A-wave advance of the ABCD gold cycle will be severely disappointed. Headline: Why debt is a threat to national security The national debt is not on the official agenda for Monday's presidential debate on foreign... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

The Most Important Investment You Ever Make

Admin at Marc Faber Blog - 3 hours ago
The history of the human race is a history of war. And the next war may not be groups of tanks facing off with one another. I can imagine that London's water or electricity will be cut off. Or, the system of internet connections...or the electronic banking system... will be shut down. We all depend on those things much more than we realise. Society has become very complex and very interdependent. A breakdown anywhere could mean a breakdown of the whole system. That's when you'll wish you had followed my advice and gotten a farm where you could be more or less self-sufficient... at l... more » 

A-Wave Delay To B-wave Bottom

Eric De Groot at Eric De Groot - 4 hours ago
Gold and silver have entered the A-wave’s delay phase. The fast money after the D-wave's 1-2-3 "hook" has been made (chart 1). Typically, the invisible hand uses paper supply at critical resistance to create violent chop that hides the transfer of paper control from weak (spec funds & black boxes) to strong hands. The invisible hand regains control... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Fiscal Cliff Or Not A Fiscal Cliff, You Should Be Worried

Admin at Jim Rogers Blog - 5 hours ago
Let's say there's a fiscal cliff or not a fiscal cliff. We're gonna have serious problems next year and the year after. For 2013 and 2014 you should be very worried, and you should prepare yourself. - *in Business Insider* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

Asia Has A Big Advantage

Admin at Marc Faber Blog - 6 hours ago
Asia has a big advantage. It doesn't have the same entitlement culture of the developed countries. - *at the Halkin conference in London * *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

The Three-And-A-Half Class Society

The U.S. has a three-and-a-half class society. According to demographer Joel Kotkin, California has become a two-and-a-half-class society, with a thin slice of "entrenched incumbents" on top (the "half class"), a dwindling middle class of public employees and private-sector professionals/technocrats, and an expanding permanent welfare class: about 40% of Californians don't pay any income tax and a quarter are on the Federal Medicaid program. I would break it down somewhat differently, into a three-and-a-half class society: the "entrenched incumbents" on top (the "half class"), the high-earners who pay most of the taxes (the first class), the working poor who pay Social Security payroll taxes and sales taxes (the second class), and State dependents who pay nothing (the third class). This class structure has political ramifications. In effect, those paying most of the tax are in a pressure cooker: the lid is sealed by the "entrenched incumbents" on top, and the fire beneath is the Central State's insatiable need for more tax revenues to support the entrenched incumbents and its growing army of dependents. Let's start our analysis of the three-and-a-half-class society by noting that the top 25% pay most of the Federal income tax, and within that "middle class" the top 10% pay the lion's share of all taxes.

Another Red (Profit-Taking) Day For Europe

European stocks closed red for the third day in a row amid what we can only assume CNBC's Simon Hobbs would call profit-taking. Spain underperformed Italy but the DAX was worst on the day -0.8%. European govvies were quiet except for Spain. Spanish 2Y yield jumped the most in a month as 10Y spreads rose 10bps. It's a little early to sound the alarms here but the trend does appear to have stalled and with 2Y Swiss at its lowest (most negative) rate in 6 weeks, risk appetite seems to be lagging in Europe as Rajoy just won't says 'Si'. EURUSD is a little stronger on the day. Credit markets were as quiet as sovereigns with equities underperforming into the close and Europe's VIX popped back above 21% for the first time in 2 weeks.

Stabbing Attempt On Finland PM Thwarted

Jyrki Katainen, who has been a staunch supporter of the bailouts needed to save the Euro, while opposing common euro-bonds, has been attacked; via AP:
It is unclear if the attack was politically motivated in a country in which the Euroskeptic "True Finn" group collected 19% of the vote in the last election, and in which at least 49% of the population does not want their country to fund any more European bailouts.

Bill Gross Explains The Fed's Bubble "Merry-Go-Round" In One Tweet

Bill Gross PIMCO Bill Gross has become quite the expert at explaining the Fed's flawed, ruinous and destructive "policies" in 140 characters or less. Today is no exception.

Spiegel On Schrödinger Schauble: When It Gets Serious, He Has To Lie

By now everyone knows, even the mainstream media, that in Europe if one is a member of the oligarchy, "when it becomes serious, you have to lie" as the unelected viceroy of neofeudal Europe Jean-Claude Juncker said once upon a time, back when Greece and Spain were still "fine." Everyone also knows that judging by politican commentary and statement, in Europe it has been very serious for the past 3 years, as the lies have not ended. In fact, the more insolvent a country, the more serious it got, and the more gruesome and unbelievable the lies emanating thereof were. The one place where lying was at least somewhat contained was Europe's paymaster, Germany, which now is actively vying to not only not cede banking supervision to the ECB, but is seeking to displace the central bank in the budget and FX central planning category with a push to be elected budget commissioner and FX tsar. Eventually it will get its wish, but more when we cross to that bridge. Which is why it is surprising that today, German financial magazine Spiegel calls out none other than German FinMin Wolfi Schauble for doing precisely what Juncker was caught doing 2 years ago. Lying.

Charting The Worst Earnings Guidance In Over Five Years

With over a third of the S&P 500's market cap having reported, results have been mixed. Aggregate earnings are tracking ahead of expectations but this miracle is driven almost entirely by financials (which account for 85% of the beat) as lower expenses and higher reserve bleeds offset contracting NIMs (combined with a lack of MtM) to enable a total manufacturing of what S&P 500 EPS is. As Morgan Stanley's Adam Parker notes, the quality of the beats has been low, with companies benefiting from a mix of lower operating costs and lower taxes. Revenues are missing estimates (hurt by a stronger USD and macro weakness) and Tech has been particularly weak. More importantly, for all the hope-driven, recovery-is-around-the-corner, 'fiscal-cliff'-won't-happen believers, the majority of forward guidance has been negative resulting in the highest negative-to-positive ratio since 1Q07 but this is not priced in as top-down 4Q12 estimates have hardly budged.

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Spot The Superpower - Redux

No, it is not a glitch in the matrix: we previously used the same title about a month ago when showing the relative imports of crude in the US vs China. This time the topic is slightly different, but the players are the same. The premise: "Japan, US call off joint drill to 'retake' disputed islands fearing backlash from China." At least it is now clear who calls the shots from not only a tactical (see China starts drilling for crude in a US-protected Afghanistan yesterday), but strategic standpoint as well.

"First, God Made Idiots. That Was Just For Practice. Then He Made Politicians"

"Preservation of Capital" must be the watchword in this market; in all markets. Any mistake made is now magnified by our very low interest rates so that any error is compounded by the ability to make back the loss. In America we are facing our national elections. In Europe we are facing a hardening of positions where the divisions between the North and the South, with France lining up with the Socialist South, are edging closer to some nation or another refusing to fund. The scheme of diversion can last only so long as real decisions with real consequences are about to be forced upon the Continent as funding must come or not come.

Euroarea 2011 Debt/GDP Rises To Record, Set To Rise Further

Hardly news to anyone who has not been living in a Santorini limestone cave over the past 4 years, but as was reported overnight, official Euroarea debt to GDP (excluding trillions in contingent liabilities of course: these will only be considered in due course) rose in 2011 to a record 87.3% from 85.4% in 2010. What was also announced without much fanfare, yet oddly was not swept under the Friday 5 pm rug, was the news that Greek 2011 government debt/GDP was revised to 170.6% from 165.3%. That the number deteriorated in retrospect is no surprise: the issue is that increasingly all official economic recordkeeping in Europe has fallen under a Heisenberg blur: the second you spot a number it is no longer what it was a picosecond ago. The one agency that still does believe European numbers, a key reason why it has become a laughing stock even among "serious people", is the IMF. As the chart below shows, even the IMF expects 2012 debt/GDP to keep rising into 2013, at which point it will gradually decline. Hint - it won't, as the sovereign is now the only source of incremental leverage in a world that has run out of money good assets, and in which the consumers and corporations are receiving ever less real cashflows that can be levered on an unsecured basis (thanks to the Fed's own real money dilutive policies).

Global Debt Repudiation? IMF’s Paper On The Chicago Plan Continues To Stir Opinions

The International Monetary Fund’s paper, “The Chicago Plan Revisited” by Jaromir Benes and Michael Kumhof highlighted a means to wipe out debt by legislation by using state created money to replace the private banking system and was commented on in The Telegraph by journalist Ambrose Evans-Prichard. The full paper can be read here. In sum, the paper illuminates on a plan created in 1936 by professors Henry Simons and Irving Fisher during the aftermath of the US Depression. It examines how money  created by credit cycles leads to a damaging creation of wealth.   Authors, Benes and Kumhof argue that credit-cycle trauma - caused by private money creation – has been around forever and lies at the root of debt catastrophes as far back as ancient Mesopotia and the Middle East. They claim that not only harvest cycles lead to defaults but rather the concentration of wealth in the hands of lenders would have augmented the outcome.


Revenue Miss Parade Resumes With Caterpillar

Last night, in a spontaneous moment of clarity, the ZH brain trust tweeted the following:
So far we had our first "others" when Hasbro missed the topline, printing revenues of $1.35 billion vs expectations of $1.38 billion, but more importantly here comes CAT, with a whopper of a topline miss, worse than even the recent preannouncements could predict.
  • CAT REVENUES $16.45 BILLION, EXP. $16.74 BILLION, EPS$ 2.54, EXP. $2.22
  • CAT SEES 2012 EPS $9.00-$9.25, PREVIOUSLY HAD SEEN $9.60

Frontrunning: October 22

  • Dead Heat for Romney, Obama (WSJ)
  • The Cheerful Billionaire Who Thinks Obama's a Socialist (Businessweek)
  • "Get to work, Mr. Japanese Chairman": Japan Exports Tumble 10% as Maehara Presses BOJ to Ease (Bloomberg)
  • Chinese Investors Fear Chill in Canada (WSJ)
  • Rosneft Buys BP’s TNK-BP Stake for $26 Billion in Cash, Shares (Bloomberg)
  • Hong Kong Defends Its Currency Peg for First Time Since 2009 (Bloomberg)
  • Democrats threaten payroll tax cut consensus (FT)
  • Spain's Rajoy gets mixed message in regional votes (Reuters)
  • Merkel to warn UK on Europe budget veto (FT)
  • Netanyahu says doesn't know of any U.S.-Iran talks (Reuters)... neither does Iran, so near certainty
  • Der Kurrency Tsar: ECB’s Knot Backs Schaeuble Call for Stronger EU Budget Power (Bloomberg)
  • Fannie Mae Limiting Loans Helps JPMorgan Mortgage Profits (Bloomberg)

Overnight Summary: Same Confusion, Different Day

Once again confusion is rife overnight, following yesterday's main European event, Spain's first "mixed" regional election, which saw Rajoy's PP party in his home state of Galicia eeking a majority by a few seats, offset by wins for nationalist parties in the Basque Country. The immediate read here is that the Galician win is an endorsement of Rajoy's "austerity poilicies" and thus EUR positive (which have yet to be actually implemented as Spanish spending continues to rise, as tax revenues continue to drop), yet it makes the likelihood that Spain requests a bailout before the Spanish regional election on November 25, which is about secession, virtually nil, and thus SPGB negative. Furthermore as Bank of America points out "some euro-area govts may remain reluctant to support Spain’s request as long as yields continue to be low, banks haven’t been recapitalized; probably reinforced by Catalonia elections" but that is a reality tale for another day - the "market" can only handle so much.

Today’s Items:

International Monitors
44 United Nation so-called observers will be deployed around the country to monitor the US elections on November 6th.    Ben Emmerson, of the UN, has come out and warned not to elect Romney because it would be a democratic mandate for torture.   So, there goes the idea of just observing folks.   Could the fact that Obama plans for the UN to tax Americans in his second term sway these so-called observers?    We will see.   Or, could the UN be taking over the job of ACORN?

India Signals It Is Rearing To Kick Monsanto Out!
A high-profile Indian parliamentary panel is reviewing GM Crops and if Monsanto becomes “a nuisance”, it can be kicked out.    Monsanto’s relationship to India farmers is already tenuous considering it was accused of biopiracy earlier this year by India’s National Biodiversity Authority.    So, while the EU sides with Monsanto against the French GMO Cancer study, India may have a chance.

6 Imminent Changes to Social Security
Here are three…
1. Monthly checks will be 1.7% bigger.
2. Social Security tax will go from 4.2 to 6.2%.
3. The Tax cap will increase to $113,700
And the Social Security ponzi scheme continues.

Only 2 Things Can Save America
According to Jim Rogers, only two things can save America, the largest debtor nation in the world…
1. The energy revolution
2. The agricultural revolution
He goes on to say that both of these things are reliant on spending in Washington.    He even goes on to say that Obama and Romney are the same thing and they are both bad for America.

Bank of America Backs Obama
Last year, Warren Buffet invested $5 billion in Bank of America and now, this bank has “loaned” $15 million to the Obama campaign.   Remember, Obama was supposed to speak at the Bank of America Stadium at the Democrat National Convention; however, since not enough suckers err… people that could be brought in, they moved it elsewhere.   Keep in mind that Bank of America is in big trouble from the Merrill Lynch Merger.   Could this be a quid-pro-quo?    We will see.

Why Money Is Pouring Into Hard Assets All Over The World
Combining the following…
1. Inflation in the euro-zone is 2.6% with the promise of more printing.
2. Chinese GDP has dropped from over 10% to 7.4% in the third quarter.
3. The US has anemic growth with more jobless claims.
4. Central banks are printing to get their respective economies going.
Is it any wonder why Michael Pento believes there is a global race into hard assets?

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

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