Friday, October 19, 2012

This Is Why, To An Economist, QE Refuses To Work

There is practical, everyday common sense... and then there is economics. Because when it comes to explaining why a square peg won't fit into a round hole, only an economist will tell you, over and over, that it will eventually happen, one must just tweak the theory a little first, and then reality will promptly follow. And while even economists have enough of a frontal lobe (and realize there is little grant money) to pursue intractable pegs and hole problems, when it comes to the theory at the heart of their beloved Keynesian voodoo religion, namely Quantitative Easing, the answer is always one, and it is very simple: we need more! Yet even economists are not naive enough to not recognize that QE has not worked in any of its 4 previous iterations (logically, as if it had there would be no need for a fifth, open-ended one). Where it gets fun is watching them come up with amusing yet convoluted, involved and outright demented explanations, some even in chart format, why QE keeps on failing. Below, we present just such a graphic explanation which only an economist could love, or care about.

The Ultimate World Economic Scorecard

When you are out this evening at your cocktail party, discussing the state of the world, how everyone should be buying GOOG on the dips, how AAPL looks cheap (and the mini-iPad is coming soon), all that cash-on-the-sidelines, and how sentiment is so low; perhaps this handy little global economic scorecard will help bring a sense of reality back to the conversation. Barclays' Julian Callow provides everything you need to know about financial balances and economic performance (but were afraid to look) in one handy table.

Why Rajoy's 'Delay-And-Pray' Strategy Won't Work

The circular rationale for believing that Spain is anything other than a basket case is remarkable. As we pointed out last night, in context the market-based signals that so many are basing their opinion on (including Rajoy, Van Rompuy, and Hollande it seems) are extremely misleading. Fundamentally, as UBS explains, the hope that Spain will request a bailout anytime soon is misplaced as there is no immediate pressure to do so and the government would prefer to negotiate a more favorable MoU. However, two major issues stand in the way of that delayed reality - an insufficient bank recap; and the federal nature of Spanish government creating obstacles to deficit reduction.

The Importance of Spreading Activity In Gold & Silver

Eric De Groot at Eric De Groot - 5 hours ago
Only a damn fool to argue with Jim's comments below on the use spreading activity in gold and silver. Spreading activity is so heavily used by the invisible hand to influence the markets its a key component of many indicators/analysis routinely presented on Insights. Jim correctly suggests that the COT report (data), heavily layered and convoluted, does not reveal... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Why I can complain about taxes (Patrice Lewis) at Rural Revolution - 6 hours ago
This week a liberal reader sent me a list (which has apparently been circulating on the internet) on the subject of taxes. “Hello!” began the generic message. “Please think about this email before you complain about taxes. If you don’t like taxes…” What followed was an extensive list of things supported by taxes, and urging us to NOT use these items or services if we object to paying for them. However the author blurred the critical distinction between federal, and state and local taxes, and cannot seem to distinguish between government functions mandated by the Constitution, and th... more » 

Silver Fails at 32.50 Support, Attempting to Hold at $32

Trader Dan at Trader Dan's Market Views - 7 hours ago
You can see on the weekly chart that silver failed (once again) to extend through stubbornly strong overhead resistance near $35. Having done so, it is now setting back as speculative longs are getting flushed out. Additionally, fresh shorting is occurring. The metal looks like it wants to drift lower yet unless it can pop back over $32.50 before the weekly trading ends. If it does not, odds favor a move down towards the 50 week moving average near the $31 level. That would put it back near the middle of the very broad trading range that it has been stuck in for more than year now ... more » 

Will The Real Economy Please Step Forward...

Dave in Denver at The Golden Truth - 7 hours ago
*"I'm Dave In Denver and if you really believe that voting makes a difference, then I recommend voting early and often"* It really irritates me when I hear on financial tv and read in the online media/newspapers that the economy and the housing market are "recovering." So I wanted to go over some data that is not widely presented in the above sources of news and let readers draw their own conclusion. My contention is that, while on the surface the trillions pumped into the economy so far has provided a small, nominal "bounce" in the economy, beneath the "veneer" of this highly p... more » 

Another A-wave Delay In Gold Underway

Eric De Groot at Eric De Groot - 7 hours ago
How many times have we seen gold collapse after the London physical market closes? This elevator shaft style decline is characteristic of a paper operation and should come as no surprise to regular readers. The A-wave delay unfolding as I write transfers ownership of the trend from the strong to weak hands despite limited downside risk. It accomplishes this feat through a fear based chop... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

30-year mortgage rates falls to near-record low

Eric De Groot at Eric De Groot - 9 hours ago
The confluence of "too big to fail" and "too important* to fail" policies has sent 30-year mortgage rates near record lows. This is why I often say to myself, hold your nose and buy. This phrase reminds me not to let personal opinion or biases from corrupting the message of the markets. Chart 1: Phlx Housing Index Chart 2: Phlx Banking Index *... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Markets: It’s Going To Get Worse Next Year

Admin at Jim Rogers Blog - 9 hours ago
It’s going to get worse next year. 2013, 2014 – you should be very worried and you should prepare yourself. There are a few parts of the world economy that are going to boom over the next few years – agriculture is one of them. It’s not going to be all disaster. - *in Forbes * *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.* 

France's 'Rich' Tax = Deals on Paris Mansions

Eric De Groot at Eric De Groot - 12 hours ago
The main fallacy of the 'tax the rich' solution is the assumption of immobility. The rich following a path (of least resistance) clearly defined in the history books, however, flees uncertainty with great mobility. While there's a growing number of deals on Paris mansions, who's lining up to buy them? If the flight of physical and intellectual capital... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Retail sales point to stronger economic growth

Eric De Groot at Eric De Groot - 12 hours ago
The economy will continue showing nominal growth as long as retail sales (retailers) lead the broad market higher. Let the experts argue over adjectives chosen to describe the rate of growth. Observation, not opinion, is the key to timing the stock market’s transition from up to down. The stock market's new highs have yet to be confirmed by the S&P retail stock index (chart). We saw... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

25 Years Later: The Dow's Biggest Loser (And Winner)

Of the current stack of 30 'Blue-Chip' stocks that comprise the Dow Jones Industrial Average, Alcoa has managed to do the worst over the past 25 years - gaining a cumulative 63% in the last 25 years (or 2.2% annually). The Dow itself, based on Bloomberg's Chart of the Day, has risen 627% since the crash in 1987 (or 8.6% annually) - almost 10x that of Alcoa; while McDonald's (perhaps perfectly summarizing what America is all about) has risen on average 12.8% per year for a 1620% gain since Black Monday. But who has impacted the Dow the most since its highs in October of 2007? (Hint: they disappointed this week!)

If The Market's Disconnect With Economic Reality is Over, Watch Out Below

As market participants ponder the disappointing post-QEtc. performance on their 'Bernanke/Draghi-Put'-floored equities, perhaps these three charts will help in comprehending just how much hope there is in the world's equity markets. The disconnect from macro-fundamental is not unique, but has had significant and extremely rapid repercussions in the past. It seems, however, that just like AAPL, everyone believes everyone else to be the greater fool - and this time is different.

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How Ben Bernanke Became A Hedge Fund's Worst Enemy

Whether it is hope, greed, fear, repression, systemic correlation, volatility suppression, or sheer unadulterated idiocy; the smart money has been desperately underperforming the 'index' in US equity markets since Ben Bernanke unwrapped a can of QE2 on us all. Are the smart-money 'realists' playing the long-term game and the dumb-money index-trackers herding into whatever worked yesterday? Who knows? One thing is for sure, Bernanke is no friend of the hedge fund community - anymore.

Today's Redbull-Sponsored Market Plunges By Most In 4 Months

Whether its AAPL, GOOG, or the broad equity indices, today saw the bulls 'Baumgartnered'. Despite a valiant attempt to rally into the close, because Bernanke forbid the Dow close the week red, the NASDAQ is 4% off its Wednesday lows (-1.3% on the week) as AAPL suffers its largest 3-week decline since the March 2009 lows (closing with a $609 handle -3.6% today!) and Tech is -5.7% from QEtc. The weakness was absolutely systemic as cross-asset-class correlations were extremely high and CONTEXT (our broad risk-asset proxy) tracked lower and stabilized into the close. Gold, Copper, and Oil all ended the week clustered together down around 1.7% as the USD ended practically unchanged. Credit's mid-week epic short-squeeze lingers in traders' minds as equities underperformed. Treasury yields end the week up 9-11bps. VIX jumped back above 17% suggesting further weakness for stocks. S&P futures are dropping after-hours - closing at lows of the day - disregarding the late-day cash ramp.

Which Of These Days Is The Sell-Off?

One of these days is not like the other...

Senate Launches Investigation Into Libyan Consulate Attack

Just in:

Shouldn't this have taken place long ago? At least we now know what the watercooler talk for the next 2 weeks will be.

The Full Obama/Romney Roast Speeches: "What Are We Doing Here?"

  It's the anniversary of the 1987 crash. It's a Friday 'after' another failed EU Summit. The Dow is down 200pts. You are not buying the dip. So enjoy the full Romney vs Obama roast from last night in all its honest truthiness.

This Is The Housing Bubble Beneath The "Recovery"

We want to 'believe', we really do; but anyone with any sense (and no skin in the game) can see through the data; the eon-like periods of foreclosure and the drastically reduced supply. No matter how 'bullish' homebuilders are, or how much they dream of a future pickup, calling the recovery (as Bob Shiller recently noted) is just a fool's errand. The truth is, for the average citizen, housing is not recovering - the wealth effect is not creating animal spirits - and we do indeed have more to fear than fear itself. The following 79 second clip from Bloomberg TV should perhaps clarify the 'difference' in demand for housing. Primary residence 'buyers' are down remarkably, while 'investors' are up dramatically - now at pre-crisis bubble levels! Perhaps, as we noted here, Och-Ziff's stepping away from the 'flip-that-house' or 'REO-to-Rental' game is as good an indicator of exuberance as any.

Debt crisis: Merkel blocks eurozone support efforts 

Angela Merkel reasserted German control over European strategy by insisting that the bail-out machinery would not pay for the past banking debts while also dismissing French plans to spread wealth.

by Louise Armitstead, The Telegraph:

At the end of a two-day EU summit in Brussels – the 20th summit since the start of 2010 – leaders agreed a fragile-looking timetable to implement a banking union.
But the German Chancellor doused the progress by refusing to agree to measures for immediate support.
Read More @

XBox Generation Snoops: Britain’s intelligence agencies to recruit apprentice “CYBER SPIES”

Teenagers will have the chance to train for a career in the secret services as the UK looks to combat cyber attacks.
from Sky News:
Britain’s intelligence agencies are to recruit apprentice cyber spies in an attempt to harness the talents of the Xbox generation.
Up to 100 18-year-olds will be given the chance to train for a career in the secret services countering the threat of cyber warfare and internet criminals. The scheme, announced by Foreign Secretary William Hague, is aimed predominantly at GCHQ – the electronic communications agency.
But some recruits will go on to work in the other agencies – the Secret Intelligence Service, MI6, and the Security Service, MI5. The move marks a break with past practice – when the agencies traditionally recruited mainly university graduates.
Read More @

Lew Rockwell explains how the Federal Reserve Enables War, Empire, and Destroys the Middle Class

from Capital Account:

The accused Federal Reserve bomb plotter’s home country wants details on his case. While this may make headlines, we ask Lew Rockwell of the Ludwig Von Mises Institute about one aspect of the Federal Reserve that has not made front page news: how the Fed, with its printing press, may be making war easier. After all, if the people of the United States were asked to write a check every year to the IRS in order to fund the exploding deficits and rising interest payments on the national debt, would they continue to support all these wars? Randolph Bourne may have famously quipped that “war is the health of the state,” but it isn’t the health of the economy, this is for certain. If the American people could identify their miserable economic plight with the actions of the federal reserve and with the hundreds of billions of dollars spent every year on war and defense, it is reasonable to expect that they would simply refuse the burden all together. We will ask Lew Rockwell, Chairman of the Ludwig Von Mises Institute what he thinks, and if he thinks that war is made easier by a pliant and compliant central bank.
And, sticking with this issue of the Federal Reserve as the great “enabler,” what about it’s role in “disabling” and dismembering America’s dwindling middle class? How responsible is the Federal Reserve and its quantitative easing, zero percent interest rate policy for the plight of America’s economy and its society? The two main contenders for the presidency, Barack Obama and Mitt Romney, speak often about the Fed. The candidates talk about supporting the middle class in terms of tax cuts, loopholes, and regulation but they don’t discuss the “money” in the middle class’s pockets. We ask Lew Rockwell, President of the Ludwig von Mises Institute, about what happens to the middle class if you don’t address savings.

US-Supported Free Syrian Army Are Salafi Jihadists From Saudi Arabia

by Susanne Posel, Occupy Corporatism:

The UN sent a peace envoy headed by Lakhdar Brahimi, to assess the damage being inflicted on Syria by the US-supported terrorists called the Free Syrian Army (FSA). Brahimi requested a temporary cease fire while he was in Syria; as well as for the Muslim holiday beginning October 26th.
The FSA, being leaderless, is expected to have a difficult time signing an agreement of ceasefire.
Last week, the Human Rights Watch, a UN non-governmental organization (NGO) claimed that the Syrian government had used cluster bombs against the FSA. Assad denied having possession of these weapons. According to a statement: “The Syrian Arab Army does not possess these kinds of weapons and affirms that these reports (of their use) are completely untrue.”
Read More @

Patrick Clawson & Iranian False Flag Senerios: USS Enterprise?

from NoLongeraTheory:

That the warmongers are so desperate to frame Iran for any and every attack taking place in the world is worrying, to be sure, but at the end of the day, perhaps there is something hopeful we can take away from this. The fact that the Patrick Clawsons and Gary Harts and Dick Cheneys of the world are dreaming up their provocations and incidents to justify an invasion of Iran means that, at the very least, some measure of justification is still needed to embroil the NATO powers in another war. Once again we find that it is the people who hold the power, and it is the people who must be convinced about the need for this war. Here in 2012, now 9 years after the debacle in Iraq and 1 year after the debacle in Libya, are going to need more convincing than ever that it is necessary to deploy the war machine yet again for another round of military adventurism. And now that the mainstream media has expended whatever was left of their credibility pimping the “weapons of mass destruction” propaganda, the so-called political elite realize that nothing less than a spectacular provocation will do to rouse the public’s ire.

Investors seeking allocated gold

from Gold Money:

Another weak day for gold and silver yesterday has continued during Asian and European trading today, with gold falling below $1,750 and silver once again trading under $32.50. Yesterday brought mixed economic news: one the hand, claims for unemployment benefits in America shot higher while corporate earnings from giants such as Google disappointed; but strength in the Philadelphia Fed’s manufacturing survey gave the bulls something to cheer about. The Dollar Index gained 0.40%, with the greenback also strengthening against a broad basket of emerging-market currencies, as that familiar “risk off” trading returned.
Action in gold at the moment may be disappointing for some, who may have been expecting an endless string of new highs following the Fed’s “QE to infinity” announcement on September 13. However, under the surface things are still moving in a decidedly bullish direction. Bloomberg reported on Monday that while gold holdings in exchange-traded products are growing at a slower pace than in 2004-2009, this is “because some investors may be moving to physical bullion after initial purchases of an exchange-traded fund”.
Read More @

Billionaire Frank Giustra: Gold Is The Mother Of All Bubbles, Which Is Why You Should Buy It

by Frik Els, BusinessInsider:

Canaccord’s Global Resource Conference happening in Miami at the moment featured a lengthy lunchtime chat with billionaire investor Frank Giustra where he said “he doesn’t want to sound apocalyptic,” but probably ended up scaring the bejezus out of the audience anyway.
In 2002 Giustra wrote a book called A Tarnished Dollar Will Put the Shine on Gold.
That was back when gold was trading below $300 and quantitative easing wasn’t even a glint in Ben Bernanke’s eye.
Read More @

Turk – One Of The Most Important Gold Charts Ever

from KingWorldNews:

Today James Turk sent King World News one of the most important gold charts ever. The charts reveals that despite recent weakness, “Gold is in an exponential upward trend.” Turk also added: “This is exactly the pattern that you see when a currency is heading toward hyperinflation, and this chart shows all four currencies headed that way.”
Here is what Turk had to say in this King World News exclusive, along with his incredibly powerful chart: “I think John Embry got it exactly right in his KWN interview this week, Eric. John made the point about the US election coming up and the effort to make everything look as good as possible. We already saw that happen earlier in the month when the questionable unemployment number was released.”
James Turk continues @

Problem is Demand: First IBM, then Intel, now Google

by Mike Shedlock, Global Economic Analysis:

Three technology bellwethers missed income or revenue expectations in the past few days. Let’s take a quick look at IBM (IBM), Intel (INTC), and Google (GOOG).
TechCrunch reports IBM Q3 Earnings Mostly In Line With Expectations
IBM just released its Q3 2012 financials. Big Blue’s GAAP earnings came in at $3.8 billion, up 3% from the last quarter. Non-GAAP earnings were $4.2 billion. Overall, the company reported revenue of $24.7 billion, down from $25.8 billion in Q2.
Read More @

Spain Seeks To Outlaw Filming Cops

Weeks after footage showed police beating demonstrators
by Paul Joseph Watson, InfoWars:

Following massive protests in Spain over the last couple of months as demonstrators revolt in response to draconian austerity measures imposed by the crumbling European Union, Spain has now moved to make filming police a crime.
“The director general of police, Ignacio Cosidó, announced on Thursday that the authorities are studying the possibility that the next update to the Public Security Law could include an article prohibiting the recording, processing or circulation on the internet of police officers performing their duties, if doing so would endanger them or the operation in which they were engaged,” reports El Pais.
The law would also make it illegal for protesters to cover their faces, undoubtedly an effort to make them easier to identify. Cops who disguise their identity in full riot gear and helmets would not be held to the same standard.
Read More @


Will silver see a major supply squeeze and massive price increase?

One ultra bullish analyst reckons that one day the silver price could exceed that of gold. Perhaps an unlikely scenario but there are factors which suggest at least a relative closing of the gap.
by Lawrence Williams,

A note by long term silver analyst (and silver bull), Israel Freidman published on Ted Butler’s internet site contains some true gems which will be manna to the ears (if you can have such a thing) of silver investors everywhere. Leading off with the comment that silver is, in Freidman’s view, the best raw material of all for the investor to hold, he says he held this opinion 30 years ago (when silver was under $5 an ounce) and holds the same view today (at $33) and that for the investor in bullion, silver remains one of the few commodities that the average person can actually hold in his possession (gold is another but the price precludes the ‘average’ investor holding all but a tiny amount in comparison).
And he waxes enthusiastic, particularly about the US Mint’s silver eagle coin which he describes as the most beautiful, and popular, coin in the world. He is convinced that it is so popular that one day the US Mint will not be able to keep up with demand (we have seen occasional times in the recent past when the Mint has had to ration sales) and that premiums on the coins will explode if, and when, the Mint has to stop producing them.
Read More @

Taxes and Devaluation: Parallels Between Weimar & the United States

from Silver Vigilante:
To the left, a medal commemorating Germany’s 1923 hyperinflation. The engraving reads: “On 1st November 1923 1 pound of bread cost 3 billion, 1 pound of meat: 36 billion, 1 glass of beer: 4 billion.” Man, I hope that this is not a forecast of parallels between Weimar & US. I will have to move away from microbeers.
The hyperinflation in Weimar Germany is a textbook example of what the US very realistically could one day face. The situation in which the US finds itself is very much similar to that of Germany after World War I. It, after all, was considered by the international community and the League of Nations – which the US did not join due to jingoism more than anything – a threat and had to foot the bill for damages for the war. This means Germany would have to continue paying down debt for the most massive World War in history.
Most people do not make this connection. They see only the monetary parallels between the two countries. But, the empire-building projects of both countries are very much at the forefront of what brought inflation and hyperinflation about.
Read More @ Silver Vigilante

U.S. Congress introduces bill ordering FEMA to conduct ‘mass fatality planning’

by Ethan A. Huff, Natural News:

While millions of Americans were busy watching the elephant puppet battle the ass puppet at the latest political circus, the United States Congress quietly introduced a new piece of legislation ordering the Federal Emergency Management Agency (FEMA) to begin preparing for mass casualties throughout the country.
House Resolution 6566, also known as the Mass Fatality Planning and Religious Considerations Act, would amend the Homeland Security Act of 2002 to mandate that FEMA immediately begin conducting “mass fatality planning” in preparation for a major event or series of events that may kill off untold numbers of people.
Introduced by Rep. Laura Richardson (D-Ca.), H.R. 6566 provisions that the Administrator of FEMA — William Craig Fugate currently holds the Administrator position at FEMA ( — provide “guidance and coordination” for dealing with a mass casualty event arising from a natural disaster, terrorist act, or “other man-made disaster.”
Read More @

Derivative Meltdown and Dollar Collapse

by James Hall, Activist Post

The frightening prospects from a derivative meltdown, well known for years, seem to deepen with every measure to prop up a failing international financial system. The essay Greed is Good, but Derivatives are Better, characterizes the gamble game in this fashion:
The elegance of derivatives is that the rules that defy nature are not involved in intangible swaps. The basic value in the payment from the risk is always dumped on the back of the taxpayer. Ponzi schemes are legal when government croupiers spin loaded balls on their fudged roulette tables.
Under conventional international trading settlement, the world reserve currency is the Dollar. The loss of confidence in the Federal Reserve System causes a corresponding decline in value in U. S Treasury obligations. Add into this risk equation, derivative instruments that are deadly threats that can well destroy national currencies.
Read More @ Activist Post

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