In a little under four minutes, CNBC's Gary Kaminsky provides a voice
of reason amid the
'Gold-and-Bonds-are-in-a-bubble-but-Apple-is-awesome' meme. Reflecting
on some of the mind-blowingly crazy statistics of this market's recent
inexorable rise, central bank balance sheet eruptions, and valuations;
Kaminsky (an ex-PM as opposed to 'reporter') provides six clarifying
words: "We know this will end ugly!" From the lack of
credibility of any Fed exit, to the explosion of the monetary base,
Gary moves back and forth from Japan as an ever-more-obvious template
for our path past the Keynesian endpoint. Finally, he concludes that: "Bernanke is a kamikaze pilot... experimenting [in monetary policy] and is destined to fail."
By: Jeffrey Nichols, Priceless Gold and Silver:
We have long expected further monetary easing by the U.S. central bank
. . . but this past Thursday’s news from the Fed was more than most
gold investors could have imagined or hoped for. In reaction to
persistent recession-like conditions and continued high unemployment in
the U.S. economy, the Fed is now embarking on even more reflationary –
and ultimately inflationary – monetary policies.
In a statement following Thursday’s Federal Open Market Committee
(FOMC) meeting, the Fed said “If the outlook for the labor market does
not improve substantially, the committee will continue its purchase of
agency mortgage-backed securities, undertake additional asset purchases,
and employ its other policy tools as appropriate until such improvement
is achieved in the context of price stability.”
More specifically, the Fed said it will buy $40 billion of
mortgage-related debt each and every month until the outlook for
employment improves significantly. At the same time, the Fed will
continue its “Operation Twist” program in which it sells short-term
securities and buys longer-term Treasury debt. And, in addition, the Fed
stated it is unlikely to raise interest rates from their current
near-zero levels at least until mid-2015.
Read More @ Priceless Gold and Silver
Curious
what geopolitical developments traders are looking at? Here is a
complete summary, in under 30 seconds, courtesy of the Chairman of the
Fermentation committee.
While the stock market in the US continues to surge (if not so much
in China where the composite is back to 2009 lows) as the relentless
liquidity tsunami makes its way into stocks, and other
, reality for everyone else refuses to wait. Last week we saw reality striking in Greece, where a section of Athens
after it ran out of all cash. Today, reality comes to the US, and
specifically its poorest city, Camden, which is a twofer, doubling down
also as America's deadliest city. It turns out Camden is about to
become even deadliest-er, as its police force is set to be disbanded
following a budget crisis in this effectively insolvent city.
The fallacy of monetary policy in the US is to believe this money will go
to the man on the street. It goes to the Mayfair economy of the well-to-do
people and boosts asset prices of Warhols. - *in CNBC*
*
* *Marc Faber is an international investor known for his uncanny
predictions of the stock market and futures markets around the world.*
Global
economic fundamentals are awful, bearish divergences are occurring
everywhere, investor sentiment is nearing bullish extremes, political
risks remain high and last week's market performance can be summed up in
four words - 'lack of follow through'. As Gluskin Sheff's David Rosenberg explains, more
than two-thirds of the rally points the stock market has enjoyed since
the summer-time lows occurred around central bank policy announcements.
So the market is really a one-trick pony here, breathing in the fumes
of central bank liquidity. What was supposed to happen, as the elites told us, was that the lagging hedge funds were going to throw in the towel and chase this market. Everyone expects this to be a major source of buying power. At the same time, what
if the bulls who lucked out this year because they hung onto Ben
Bernanke's arm decide to take profits or at the least lock in their
gains? CRitically, as Rosie details, QE3 is occurring at a
different point in the cycle this time and insomuch as it helps
invogorate already rising 'animal spirits' we suspect it has missed the boat.
"We have decided to focus on return... we need a certain level of return no matter how the market condition is"
is how the general manager of Japan's Teachers' Mutual Aid pension fund
justifies their plan to push JPY100bn (of their JPY600bn) into riskier
assets from J-REITs to hedge funds. As Bloomberg notes,
the firm is adopting a new strategy designed to counter a decline in
the value of traditional equity and bond asset classes. Notably,
following last week's Illinois pension-fund target return markdown, the
Japanese fund targets only 3-5% thanks to QE8 and two decades of
repression and stumble through. Even achieving these targets means
throwing out the 'risk' side of the equation as they push into foreign
bonds (cue next European sovereign bond rumor) and chase momentum in Tokyo real estate (TSEREIT up 19% YTD). Haven't we seen this picture before - and it didn't end well?
In a system that depends on lies and the credulity of the
citizenry, the greatest lie is that the Federal Reserve's "quantitative
easing" bailouts of the banks somehow help our citizens and
communities. To clarify this, ask yourself this question: what else could we have bought with the $29 trillion the Fed loaned or backstopped to the banks? If you enjoy quibbling about the total sum of Fed support, be my guest; the Levy Institute came
up with $29 trillion after poring over all the data, while the
Government Accountability Office’s (GAO) tally topped $16 trillion.
That's 100% of the nation's GDP and roughly 100% of the $16 trillion
national debt. While we're asking about opportunity costs,
let's ask what else we could have bought with the $10 trillion that
the Federal government has borrowed and blown in the past 11.7 years.
The national debt was $5.727 trillion when G.W. Bush was sworn into
office on January 20, 2001. It had risen to $10.626 trillion when
President Obama was sworn into office in January, 2009. It is now
$16.016 trillion, an increase of $5 trillion in less than four years in
"debt held by the public" (i.e. the Chinese central bank, the Japanese
central bank, the Federal Reserve, etc.)
In the spirit of the European Bank Stress Tests and in the continuum of the Ring around the Rosie concocted by Brussels we are about to be handed another slew of numbers that will show that Spain is fine,
prospering and running along just with no difficulties at all; thank
you. This data is being prepared by the German firm Oliver Wyman, the
German consulting firm. You may recall that we were supposed to have
audited financials by the end of September, which was promised by Spain,
however that was apparently canceled and there is no such audit
underway. So much for the promises of Spain. We can tell you now, with
surety, that the evaluation that we will be handed by Oliver
Wyman will have all of the value of the paper found in the 'banos' of
any restaurant in Madrid.
Shortly after posting the latest "balance sheet"
of the US consumer we received requests to show how this looks in a
global context, in other words, what do the balance sheets of the global
households outside of the US look like. We show what this look like
below, courtesy of the Bank of Japan, which presents the distribution of
household financial assets in context then (5 years ago) and now. It
also shows why whereas to Joe Sixpack the level of the S&P is the
most important, with 32% of total assets in stocks, in Japan and in
Europe, the average person could not care less where the stock market
is, with just 6.5% and 14.7% of assets held in equities. The US E-Trade
baby: keeping the Ponzi dream alive.
While Nomura's Bob Janjuah remains 100% correct in
his diagnosis and prognosis of the current
'grossest misallocation and mispricing of capital in the history of mankind',
his tactical short was stopped out last week. The modest loss on the
position though provided clarity on the importance of the 1450 level for
the S&P 500 and he remains confident that on a multi-month
timeframe he
expects 800 to be hit with only a muted
10% possible upside in global equities due to underlying growth, debt
and policy-maker concerns. Critically, he suggests it is premature to go
aggressively short risk at this precise moment, urges traders to stay
nimble, and warns
"...risk assets are in a bubble which of
course can extend, but which can reverse sharply and suddenly. Up here,
'valuation metrics' are not going to help much... this bubble could
extend for maybe a few months and by up to 10%, ...but that we could see
global equity markets 10/15% lower in virtually a 'heartbeat'."
There was much riding on the Apple update for the first weekend sales from the new iPhone 5 and here they are.
- APPLE SAYS IPHONE 5 FIRST WEEKEND SALES TOP 5M.
This number would be great if only it wasn't 50% off the
highest whisper estimate of up to 10 million sales in the weekend. It
is also the reason why the stock is now sliding down well over 2%,
threatening to light the AAPL hedge fund hotel on fire.
Confirming the dismal picture of advanced economy import and export declines we discussed yesterday, the following chart provides everything you need to know about the world's economic quagmire but were afraid to ask.
Of course, all the time the central-printers of the world are willing
to debauch themselves there will be momentum-chasing monkeys to
maintain the blue-pill illusion of a healthy stock market as indicative
of a healthy economy - but should you choose to swallow the red pill,
this chart of a plunging global trade volume may raise anxiety levels a
little above their current multi-year lows.
Ray Dalio, founder and co-chief investment officer of Bridgewater Associates, L.P. and one of the most successful hedge fund managers of all time told Maria Bartiromo last week that he owns gold and that he sees no “sensible reason not to own gold”. The
interview was part of the Council on Foreign Relations (CFR) Corporate
Program's CEO Speaker Series, which provides a forum for leading
global CEOs to share their priorities and insights before a high-level
audience of wealthy and influential CFR members. The respected
hedge fund manager suggested that a depression and not a recession was
likely and warned of social unrest and the risk of radical politics as
was seen with Hitler and the Nazis in the Depression of the 1930’s. Dalio spoke about how “gold is a currency” and when asked by Bartiromo “do you own gold?”, he smiled and said “Oh yeah, I do.” The
admission elicited a laugh from the CFR audience. Dalio’s interview is
important as it again indicates how slowly but surely gold is moving
from a fringe asset of a few hard money advocates and risk averse
individuals to a mainstream asset. Wealthier people and some of the
wealthiest and most influential people in the world are slowly
realising the importance of gold as financial insurance in an
investment portfolio and as money. This will result in sizeable flows
into the gold market in the coming months which should push prices
above the inflation adjusted high of 1980 - $2,500/oz. The interview
section where Dalio is asked about gold by an audience member begins in
the 43rd minute and can be seen here.
Just
when we thought Europe has already used the kitchen sink and then some
in its arsenal of bailout ideas, here comes Spain proving there is
always "something else." Bloomberg reports that the insolvent country
which is not really insolvent as long as people keep buying its bonds on
hopes it is insolvent, is launching "lottery bonds". To wit: Spain to
sell bonds through state-run lottery operator to fund regional
bailouts, two people familiar with the matter told Bloomberg’s Esteban
Duarte and Ben Sills. The issue is part of €6 billion financing through
Sociedad Estatal Loterias & Apuestas del Estado which is raising
syndicated loan. Loterias official said financing details haven’t been
completed. In other words, the national lottery, which as in Spain so
everywhere else, is nothing but an added tax on
a country's poor population but one which provides at least a tiny
hope of a substantial repayment (which never happens for the vast, vast
majority of players) so few actually complain about paying it, is
about to shift the bailout cost to the nation's poorest. Who benefits?
Why Spiderman towel makers of course. And insolvent banks.
Risk-averse sentiment dominated the first half of the session today,
as market participants digested yet another disappointing macro
economic data release from Europe (German IFO), which fell for a fifth
consecutive month. In addition to that, EU’s Van Rompuy said that he
sees tendency of losing the sense of urgency, likely pointing the finger
at Spain which is yet to request monetary assistance to prevent
another speculative attack. It remains unclear when the official
request will be made, but there is a risk that the application will
only take place after regional elections in late October or even after
the Eurogroup meeting in November. Finally, German finance ministry
spokesman said that leveraging the ESM to EUR 2trl, as reported by Der
Spiegel over the weekend, is not realistic and called the report
completely illusionary. As a result, peripheral bond yield spreads are
wider, with Italian bonds underperforming as markets prepare for this
week’s supply from the Treasury. Heading towards the North American
cross over, EUR/USD is seen lower by around 75pips and is trading in
close proximity to the 1.2900 level, with bids said to be placed below.
Talk of dividend related buying in GBP/USD, as well as EU budget
related selling in EUR/GBP by two different UK clearers helped support
GBP/USD. Going forward, there are no major economic releases set for
the second half of the session, but the BoE will conduct its latest APF
and the Fed will buy between USD 1.5-2bln in its latest POMO.
- World on track for record food prices 'within a year' due to US drought (Telegraph)
- Foxconn halts production at plant after mass brawl (BBC)
- Germany Losing Patience With Spain as EU Warns on Crisis Effort (Bloomberg)
- Fed Recovery Doubts Spur Investor Bid for Treasuries (Bloomberg)
- Japan protests as Chinese ships enter disputed waters (Reuters)
- In Shark-Infested Waters, Resolve of Two Giants Is Tested (NYT)
- China jails Wang Lijun for 15 years (FT)
- China closes in on Bo Xilai after jailing ex-police chief (Reuters)
- European Leaders Struggle to Overcome Crisis Stalemate (Bloomberg)
- Politicians 1: Austerity 0 - Portugal Gives Ground on Worker Contributions (WSJ)
- Obama Controls Most of His Money as Republicans Have More (Bloomberg)
- Coeure Says Not Clear That Further ECB Interest-Rate Cut Needed (Bloomberg)
- France Seeks Labour Overhaul (WSJ)
The last time we saw a bevy of regurgitated European rumors shortly
refuted was last Friday. Today we get a redux, following a hard push by none other than Spiegel (precisely as we
predicted a month ago:
"And now, time for Spiegel to cite "unnamed sources" that the EFSF is
going to use 3-4x leverage") to imagine a world in which the ESM can be
leveraged 4x to €2 trillion. This is merely a replay of last fall when
Europe's
deus ex for 2 months was clutching at a cobbled up
superficial plan of 3-4x EFSF leverage, which ultimately proved futile.
Why? Because, just like in 2011, one would need China in on this
strategy as there is simply not enough endogenous leverage in either the
US or Europe which would make this plan feasible. And China, we are
sad to say, has a whole lot of its own problems to worry about right
about now, than bailing out the shattered dream of a failed monetary
unions still held by a few lifelong European bureaucrats, which this
thing is all about. As expected, moments ago Germany refuted
everything. Via
Reuters:
"Germany's finance ministry said on Monday that talk of the euro
zone's permanent bailout fund being leveraged to 2 trillion euros via
private sector involvement was not realistic, adding that any
discussion of precise figures was "purely abstract." This also explains
why we devoted precisely zero space to this latest leverage
incarnation rumor yesterday: we were merely waiting for the refutation.
Some
wonder why we have been so convinced that no matter what happens, that
the Fed will have no choice but to continue pushing the monetary
easing pedal to the metal. It is actually no secret: we explained the
logic for the first time back in March of this year with "
Here Is Why The Fed Will Have To Do At Least Another $3.6 Trillion In Quantitative Easing."
The logic, in a nutshell, is simple: everyone who looks at modern
monetary practice (as opposed to theory) through the prism of a 1980s
textbook is woefully unprepared for the modern capital markets reality
for one simple reason: shadow banking; and when accounting for the
ongoing melt of shadow banking credit intermediates, which continues to
accelerate, the Fed has a Herculean task ahead of it in restoring
consolidated credit growth. Shadow banking, as we have explained many
times
most recently here,
is merely an unregulated, inflationary-buffer (as it has no matched
deposits) which provides the conventional banking credit transformations
such as
maturity, credit and liquidity, in the process
generating term liabilities. In yet other words, shadow banking creates
credit money which can then flow into monetary conduits such as
economic "growth" or capital markets, however without creating the
threat of inflation - if anything shadow banks are the biggest systemic
deflationary threat, as due to the relatively short-term nature of
their duration exposure, they tend to lock up at the first sing of
trouble (see Money Markets breaking the buck within hours of the Lehman
failure) and lead to utter economic mayhem unless preempted. Well,
preempting the collapse in the shadow banking system is precisely what
the Fed's primary role has so far been, even more so than pushing the
S&P to new all time highs. The problem, however, as we will show
today, is that even with the Fed's balance sheet at $2.8 trillion and
set to rise to $5 trillion in 2 years,
it will not be enough.
Today’s Items:
Austrian Die Presse, the former ECB banker
says that… Since 2010, the European Central Bank has been in a panic
and has been flooding the market with euros. We could see, as soon
as this December, the collapse of Greece. We may be seeing that the
destruction of Europe’s democracy is in its final phase.
Since the initial discovery of a single 10 oz
Tungsten-filled gold bar
in Manhattan’s jewelry district, dealers have discovered at least ten
more fake 10-ounce “gold bars.” Four fake bars were purchased from a
well-known Russian salesman. Hmm… Our investigation has gone over
the pond… And possibly getting closer to HSBC. In addition,
there are ways, using ultrasonics to detect fake gold.
As per the 2010 Dodd-Frank Act, starting
next year, new rules will force banks, hedge funds, and other traders to
back up more of their bets in the $648 trillion derivatives market by
posting collateral. Unfortunately, there is a shortage of Treasury
bonds and other top-rated debt to use as collateral. So, what will
banks use? Why not your IRA’s, 401k’s, checking, and savings
accounts?
The US State Department, under Hillary
Clinton, is furious at CNN for reporting the contents of the diary of
slain American ambassador Christopher Stevens. Was it because it was
reported over objections of the family? Hell no. It was because
his diary clearly shows that the Obama administration was lying again as
his diary described his fears and warnings of a terror threat well
before the Benghazi attack on September 11th.
This video, by TruthNeverTold, clearly
illustrates, using the Louisiana Purchase that one ounce of silver
bought 45 acres of land. In the post dollar world, your physical
silver may not buy you 45 acres of land; however, it may be possible to
buy an acre for one ounce; thus, you could buy an acre in the future for
a $40 investment today. Another reason, after preparing, to keep
stacking physical.
In an attempt to fill the void of real
mail, and to increase revenue, the post office will address its serious
budget deficits by increasing the amount of junk mail. 84 billion
pieces of junk mail was delivered last year with 60 percent of it being
acted upon by the recipients. So yes, you will be getting more junk
mail, or love letters for your money.
Finally, please prepare now for the escalating economic and social unrest. Good Day!
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Curious
what geopolitical developments traders are looking at? Here is a
complete summary, in under 30 seconds, courtesy of the Chairman of the
Fermentation committee.
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