At
its most fundamental level, SocGen's Dylan Grice notes that economic
activity is no more than an exchange between strangers. It depends,
therefore, on a degree of trust between strangers. Since money is the
agent of exchange, it is the agent of trust. Debasing money therefore debases trust.
Grice emphasizes that history is replete with Great Disorders in which
social cohesion has been undermined by currency debasements. The multi-decade credit inflation can now be seen to have had similarly corrosive effects. Yet central banks continue down the same route. The writing is on the wall. Further debasement of money will cause further debasement of society. Dylan, like us, fears a Great Disorder.Currency Wars By Rickards, James (Google Affiliate Ad)
Bill Gross: The US Is A Debt Meth Addict - Unless The Fiscal Gap Is Closed Soon "The Damage Will Be Beyond Repair"
The highlights from Bill Gross' latest monthly piece:- Armageddon is not around the corner. I don’t believe in the imminent demise of the U.S. economy and its financial markets. But I’m afraid for them.
- Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow and the dollar would inevitably decline. Bonds would be burned to a crisp and stocks would certainly be singed; only gold and real assets would thrive within the “Ring of Fire.”
- If the fiscal gap isn’t closed even ever so gradually over the next few years, then rating services, dollar reserve holding nations and bond managers embarrassed into being reborn as vigilantes may together force a resolution that ends in tears. The damage would likely be beyond repair.
- The U.S. and its fellow serial abusers have been inhaling debt’s methamphetamine crystals for some time now, and kicking the habit looks incredibly difficult
Sam Zell On "Class Warfare Crap", QE3 Unreality, And Why Everything Is Mispriced Due To The Fed
"QE-whatever has created artificial numbers that the underlying won't support"
is how Sam Zell sums up his view of the Fed's actions, adding that the
Dow should be more like 9000, not 14000. The typically optimistic
bottom-feeding real-estate magnate says he is not buying here, is
gravely concerned about liquidity needs, and in his assessment "everything is massively too expensive."
This epic CNBC interview-fest, where the less-than-cheer-leading Zell
was allowed to speak, includes his views on a pending recession (as he
sees capex planned projects being delayed) and while trying not to play
the political card too strongly, he asks that we "stop this class
warfare crap" and that the animal spirits are unleashed - as the game is
being stacked against him. "We're kicking the can down the
road... and with QE, there is now too much capital chasing too few
opportunities - even when nobody has confidence in the future!"The ECB - EUR22 Trillion Is Missing
Think of it; twenty-two trillion dollars worth of assets and liabilities and accounted for nowhere. These
are twenty-two trillion dollars ($22 trillion) of loans and
securitizations and mortgages that are found and accountable for by no
one. These are real assets and real liabilities that have been turned
into cash by the ECB and it causes us to wonder just how accurate the Money Supply numbers are for Europe
with this amount of cash being pumped into the system. We also wonder
what anyone’s real balance sheet looks like and I wonder what kinds of losses are being incurred and by whom. This is what we are investing in when we buy European bonds? This is where we are putting our client’s money?Is It Different This Time?
If history is a guide, the rest of the year is destined to be a winner.
As Barclays points out, thew typical election-year cycle is a first
half of range-bound trading followed by a second half of acceleration
higher. 2012 has followed this pattern but on a much higher beta scale,
with the current year's performance more than 50% above typical election-year full-year performance.
Of course, we have never had a debt-ceiling and fiscal cliff debacle
that needs to be resolved between the election and year-end. What's more
interesting to us, given the surge in P/E multiple expansion driven by
central-bank largesse, is that P/E multiples have contracted notably in the latter half of election years in the last 40 years.
So when your long-only manager says - you have to buy because of the
election year cycle, maybe ask him about the election year 'valuation'
cycle.If You Prop Up An Artificial Economy Long Enough, Does It Become Real?
The policy of the Status Quo since 2008 boils down to this assumption: if we prop up an artificial economy long enough, it will magically become real. This is an extraordinary assumption: that the process of artifice will result in artifice becoming real. This is the equivalent of a dysfunctional family presenting an artificial facade of happiness to the external world and expecting that fraud to conjure up real happiness. We all know it doesn't work that way; rather, the dysfunctional family that expends its resources supporting a phony facade is living a lie that only increases its instability. The U.S. economy is riddled with artifice: millions of people who recently generated income from their labor have gamed the system and are now "disabled for life." Millions more are living in a bank-enabled fantasy of free housing. Millions more are living off borrowed money: student loans, money the government has borrowed and dispensed as transfer payments, etc. Assets are artificially propped up lest a banking sector with insufficient collateral be revealed as structurally insolvent. It's not difficult to predict an eventual spike of instability in such a system; the only difficulty is predicting the date of the instability. Hiding a broken, dysfunctional economy behind a facade of artifice and illusion can't fix what's broken, it only adds to the system's systemic instability as resources that could have gone to actually fix things are squandered on propping up phony facades of "growth" and "health."The World Bank's Modest Proposal: Create 600 Million Jobs In 15 Years And All May Yet Be Well
In order to avoid social unrest and absorb the world's young people entering the global workforce, the World Bank Development Report states that 600 million jobs must be created from 2005 to 2020. As Bloomberg BusinessWeek reports,
jobs should be at the top of governments' agendas or they could face
further uprisings such as toppled leaders in Egypt and Tunisia.
"Demographic shifts, technological progress, and the lasting effects of
the international financial crisis are reshaping the employment
landscape in countries around the world, and those that successfully
adapt to these changes and meet their jobs challenges can achieve
dramatic gains in living standards, productivity growth, and more
cohesive societies." However, those countries that don't adapt, face the kind of social unrest we have warned of again and again - and are starting to see in more and more civilized Western nations. Their findings:- 90% of jobs are created in the private sector and so Governments must create an environment that encourages investment - especially in small- and medium-sized business. So - a mere 600 milion jobs and all is well - amazing!!!The Day After the Dollar Crashes By Vickers, Damon (Google Affiliate Ad)
Home Prices Relative to Gold
Eric De Groot at Eric De Groot - 2 hours ago
The first casualty of greed induced by rising prices is objectivity.
Hardcore real estate investors, while in need of an emotional respite,
should not extrapolate anything beyond a short-term, counter-trend rally
against gold. Gold's powerful C-wave rally, due 2013-2015, will
significantly outperform real estate. There’s no way smart money will
jeopardize liquidity and...
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content, and more! ]]
Thai Banks Are Safer Than Many Western Banks
Admin at Marc Faber Blog - 3 hours ago
Now I happen to believe if you have money on deposit in Thai banks, it's
much safer than if you have deposits with Citigroup, UBS, Royal Bank of
Scotland and so on, because Thai banks don't have huge derivative
portfolios. JPMorgan, they have trillions of dollars in derivatives. Nobody
knows how to value this 'garbage.' - *in China Post*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Gold Has Had A Huge Rally And Needs A Correction
Admin at Marc Faber Blog - 4 hours ago
Gold has had a huge rally — the low was $1,522 last December and we are now
over $1,700 and I think we need a correction here. - *excerpt from All
Assets Are Bad in the Near Term *
*
*Related: SPDR Gold Trust ETF (GLD)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Mom and Pop Investors Not Noted For Their Track Record
Eric De Groot at Eric De Groot - 4 hours ago
The at some point. The stock market rally will be vulnerable when the
reallocation trade from bond to stocks runs out of fuel. The means anyone
trying to 'time' stocks (or bonds) better know what bonds (stocks) are
doing, vice versa. The 5/12 breakout gap (1) tested twice on a -10% and
-5% contraction in weekly volume continues to hold (chart). ...
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content, and more! ]]
We Are Entering A Correction
Admin at Marc Faber Blog - 5 hours ago
In fact, I am now bearish about practically all assets near term. I think
we’re entering a correction time where there will be some disappointments,
where stock markets can easily drop 20 percent. - *in Money News *
*
*Related: SPDR Gold Trust (ETF), SPDR SP 500 ETF (NYSE:SPY), iShares MSCI
Emerging Markets Index (ETF)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Video: The Robert Wenzel Show
Admin at Jim Rogers Blog - 5 hours ago
*
**
*Short Summary: Wenzel talks to Rogers about topics Rogers has never
discussed before in the media. On the show, Rogers explains why he
considers North Korea a top place to invest and the one event that would
cause him to invest in Zimbabwe.
*
**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.*China Just Killed All "China Bails Out Europe" Rumors For Good
Just in case there are still any hopes that the FT, or any other credible media outlet, may come up with a story, like it used to do almost daily back in 2011 and early 2012, that China, whose stock market continues to plumb 3 year lows, has some capacity to inject cash (that it doesn't have) into a broke continent (which would never repay said cash even if it existed), here comes none other than China's Sovereign Wealth Fund to make sure there is never again a rumor that China will bail out Europe. From Reuters: "China would be interested in buying into a Eurobond backed by core euro zone countries and considers investment in bonds issued by heavily indebted European countries unrealistic, a senior official with China's $480 billion sovereign wealth fund said. Jin Liqun, chairman of the supervisory board of the China Investment Corporation (CIC), said until fundamental problems of fiscal, social and monetary policies in euro zone countries burdened by debt are solved, there could be no investment." They never will be so scratch that possibility out. Now we can limit the universe of idiotic Europe is saved (it isn't - it is only a matter of time now before the ship sinks) rumors to at least one less.Currency Wars By Rickards, James (Google Affiliate Ad)
GM September Sales Miss; Channel Stuffing Resumes
GM's stock is not enjoying news that its September sales rose 1.5% from last year, on expectations of a 2.8% increase. And while this is surprising considering the government is now in the business of funding not only the student loan bubble but Government Motors' NINJA purchasers (someone has to make those labor union votes happy) making the cost of new vehicles essentially zero when netting out the debt, what is not surprising is that GM management has once again resorted to the age old gimmick which never fails to provide an artificial boost to the true condition of GM car sales, i.e., Channel Stuffing. Because after moderating in the past few months after peaking in March, dealer inventory has once again resumed rising, and is now higher for the third month in a row, increasing to 689,334 units in September. Expect this number to continue ramping into year end as less and less GM cars are sold as we enter the dead winter season.
The Disconnect Remains; Contracting PMIs Imply Dramatic Q4 Losses For Global Stocks
Economic
Surprise Indices have begun to drift back lower in recent days after a
short-lived scurry into positive territory as anticipation of Fed/ECB
action supported equity valuations over the last few months in the
face of deteriorating earnings. Critically though, as Deutsche's Jim
Reid notes, headline PMIs (and the ISM) are still well behind levels that are consistent with current equity markets
as the disconnect between rich equity prices and poor fundamentals
remains very wide. Back around May/June they were broadly in line and
since then liquidity has propelled markets but with the data at similar
levels, and clearly the hope is that the current fundamental
weakness corrects into year-end but at current levels the S&P faces a
9% correction, Europe 22%, and China 25% - hope is indeed a powerful thing.18 Households Making Over $10 Million And 2,362 Making Over $1 MM, Collected Unemployment Benefits In 2009
Just because millionaires are people too, and they too can apparently lose their jobs, we now learn courtesy of the Congressional Research Center, that in 2009, 2,362 Americans making over $1,000,000 in income (and just shy of a million people making over $200,000) collected unemployment benefits. The amount of money allocated to evil, evil millionaire benefits in 2009 was $20.8 million, amounting to $8,806 each for the year (out of a total of $83.5 billion, of which 90% went to those earning less than $100,000). Cue tar and feather fury because these evil, evil millionaires also dared to use a legal system that, at least so far, does not discriminate based on wealth or income level. Just as the US tax system allows everyone to use the same loopholes. Note that we said so far, because it may soon "not be fair."
"At SAC It Was Understood You Provided Steve Cohen With Inside Information"
Slowly, the fund that made "information arbitrage" a household name, and almost singlehandedly created the expert network industry (first exposed on Zero Hedge in 2009 before the broader public had ever heard of them up on Part 1, Part 2 and Part 3 and all of which was summarized in Are Expert Networks About To Be Exposed As The Ringleader In The Biggest Insider Trading Bust In History?) only to watch it go up in insider trading flames (as we warned years prior), and which no regulator had dared to touch for decades, is coming unwound. The latest details in a story which once again began on the pages of Zero Hedge in 2010 come from Bloomberg, where we learn what everyone already knew, namely that when working for Stevie Cohen "it was “understood” that those assigned to give their best trading ideas to founder Steven A. Cohen would provide him with insider information." Because one doesn't generate 10-20% 'Alpha' (a term which no longer has any meaning in a market exposed to have been driven exclusively by insider trading in the pre-New Normal, and entirely by central planning in the post-New Normal era) year after year and charge 3 and 50 for being just smarter. Being first apparently counts too, but cheating beats all.The Best And Worst Performers In Q3 And September
Some surprising winners and losers in the past month and quarter.
Daily US Opening News And Market Re-Cap: October 2
Equity markets continued to edge higher today as market participants grew hopeful that a full scale bailout of Spain will take place in the very near future. So much so that even though reports that Spain is to seek bailout this weekend was denied, the risk on sentiment held strong. As a result, SP/GE and IT/GE bond yield spreads tightened further, with IT 10s now yielding close to 5%. The renewed sense of security saw EUR/USD squeeze higher towards the psychologically important 1.3000 level, while GBP/USD also benefited from a weaker USD and is trading in minor positive territory in spite of another round of disappointing macro data from the UK. Going forward, the second half of the session sees the release of the latest ISM New York index, as well as the regular weekly API report. Both the BoE and the Fed are due to conduct another round of asset purchases at 1445BST and 1600BST respectively.Frontrunning: October 2
- RBA Cuts Rate to 3.25% as Mining-Driven Growth Wanes (Reuters)
- Republicans Not Buying Bernanke’s QE3 Defense (WSJ)
- Spain ready for bailout, Germany signals "wait" (Reuters)
- EU says prop trading and investment banking should be separated from deposit taking (Reuters)
- Call for bank bonuses to be paid in debt (FT)
- Spanish Banks Need More Capital Than Tests Find, Moody’s Says (Bloomberg) ... as we explained on Friday
- "Fiscal cliff" to hit 90% of US families (FT)
- The casualties of Chesapeake's "land grab" across America (Reuters)
- U.K. Government Needs to Do More to Boost Weak Economy, BCC Says (Bloomberg)
- World Bank Sees Long Crisis Effect (WSJ)
- UBS Co-Worker Says He Used Adoboli’s Umbrella Account (Bloomberg)
- And more easing: South Korea central bank switches tack to encourage growth (Reuters)
Today’s Items:
The eurozone unemployment rate was 11.4%
in August, up from 10.2% last year. 18.2 million were out of work over
the period. While Germany, at the moment enjoys a current 5.5%
unemployment rate, the overall unemployment rate in Spain and Greece has
reached 25.1% and 24.4% respectfully. Needless to say, a two tiered
system in the EU will only make the euro collapse come sooner than
later. Of course, according to the Dallas Federal Reserve President, the U.S. is drowning in unemployment. Now why would he say that when our unemployment is officially about 8 percent?
The JP Morgan trading blunder could result
in a $100 billion loss and even the wipe-out of its entire asset
base. The massive losses that were racked up starting in April and
May 2012 are by no means over. It was originally $2 billion, however,
it appears that the losses are still increasing and that JP Morgan is
hiding a lot of important information. The reasons for possible lies
by JP Morgan are simple… Putting off international legal actions against
the criminal enterprise, known as JP Morgan. With this in mind,
please get out of paper folks.
A money market fund is an open-ended
mutual fund that invests in short-term debt securities such as US
Treasury bills and commercial paper. Money market funds are widely
regarded as being as safe as bank deposits yet providing a higher
yield. By combining proposed floating NAVs, redemption restrictions,
and minimum balances at risk, there is an attempt to lock people’s money
up as a liquidity buffer to keep the financial ponzi scheme operating
when the next crisis hits. In short, please get your money completely
out of money market funds.
Robert Fitzwilson believes, like many
others, that there will be a massive transfer of wealth from those who
own paper assets, to those that own real assets. Historically, gold
and silver are traditional safe havens, while even the cash in your
pocket is a form of derivative that will implode in perceived value.
With that in mind, after preparing, keep stacking physical.
Singapore, home of Jim Rogers, has emerged
as one of the world’s hubs for private banking for the wealthy and may
be the Fort Knox of Asia. The Southeast Asian city-state has scrapped
a 7% tax on gold and silver in an effort to turn the city into a
precious-metals trading hub to rival London and Zurich. So, when it
hits the fan, what stops Singapore from nationalizing all that gold and
silver? Simply put, if you do not have it in your hand, then you do
not own it.
Only 1746 military personal of over
126,000 in Virginia, or about 8 percent, have requested
absentee-ballots. Each Military Base is “required” to have a facility
to assist in voting. So, has the Pentagon conveniently, under Leon
Panetta, failed to carry out a federal voting law; and if so, what
reason would an unpopular administration to the military want to suppress their vote? Don’t worry, I am sure the Department of Injustice is on it.
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