Saturday, February 28, 2015

China has a massive appetite for gold

"Welcome to the year 4713. Or, if you prefer, the Year of the Ram.
The Chinese New Year, which just ended, is the largest and most widespread cultural event in mainland China, bringing with it massive consumer spending and gift-giving. During this week alone, an estimated 3.6 billion people in the China region travel by road, rail and air in the largest annual human migration.
Imagine half a dozen Thanksgivings and Christmases all rolled into one mega-holiday, and you might begin to get a sense of just how significant the Chinese New Year festivities and traditions are.
According to the National Retail Federation, China spent approximately $100 billion on retail and restaurants during the Chinese New Year in 2014. That’s double what Americans shelled out during the four-day Thanksgiving and Black Friday spending period.
As I’ve discussed on numerous occasions, one of the most popular gifts to give and receive during this time is gold—a prime example of the Love Trade..."

at http://www.usfunds.com/investor-library/frank-talk/mind-blowing-china-consumes-more-gold-than-the-world-produces/#ixzz3T4KrWO00

There's an unprecedented building boom in the South China Sea

"The barren islets, cays, reefs, shoals and rocks of the South China Sea are witnessing an unprecedented building boom. Satellite pictures have revealed more about the reclamation work undertaken by China on features, especially in the Spratly archipelago, also claimed by the Philippines, Vietnam and Taiwan.
On Woody Island, part of the Paracels group which is claimed by both Vietnam and Taiwan, China has long had an airstrip 2.7km (1.7 miles) long. Now, at Fiery Cross Reef, it appears to be building a 3km-long airstrip.
At Hughes Reef, 75,000 square metres of sand have been reclaimed since last August to house a large new facility, according to estimates by IHS Jane's Defence Weekly, a specialist journal. Further work is under way at Gaven, Cuarteron, Eldad and Mischief reefs..."

at http://www.businessinsider.com/theres-an-unprecedented-building-boom-in-the-south-china-sea-2015-2#ixzz3T4JxfSri

Ukrainians Are Ridding Themselves of Hryvnia Any Way They Can

"A chart of Ukraine's currency is nonsensical once again today.
Supposedly the hryvnia rallied again today, if only by a miniscule amount 0.15%. Yet, once again the chart is complete nonsense.
Black Market Rate
The Black Market Rate today is a bit improved, with a bid/ask spread of 29.45 to 34.55. How long that rally lasts is questionable. I presume not long.

If one could exchange at the official rate, one would immediately have an arbitrage on the black market.
Translation: The alleged official rate is "for show". No one can get it, except perhaps favored politicians and bankers taking advantage of their position of authority.
Reader John, whose father was a key figure in the Ukrainian Resistance in WWII, and whose sister currently lives in Lviv in Western Ukraine sent the following link that shows what's really happening..."

at http://russia-insider.com/en/2015/02/27/3933

"Monetary Policy Is Bankrupt" Dr. Lacy Hunt Warns "Bonds, Not Stocks, Are A Good Economic Indicator"

"Submitted by Erico Matias Tavares via Sinclair & Co.,
In Search of Solutions – An Interview with Dr. Lacy H. Hunt
We had the great pleasure of speaking with Dr. Lacy H. Hunt on the current state of the economy, the limitations of monetary policy and potential solutions to the overindebtedness problem in the main global economies.
Erico Tavares: Dr. Hunt, thank you for being with us today. Your firm manages over $6 billion in treasuries. With the S&P500 at record highs, do you share equity investors’ enthusiasm with the economic prospects of America?
Lacy Hunt: I think the S&P is disconnected from the fundamentals in the US economy. Growth last year was a quarter slower than it was in 2013. We’re on the cusp of either zero inflation or deflation. Corporate profits using the Bureau of Economic Analysis numbers, compiled using data from the Internal Revenue Service, showed year over declines in all the first three quarters of last year (4Q is not yet available). In the third quarter, the after-tax profits adjusted for inventory gains/losses and over/under depreciation were 7% below a year ago.
The standard of living declined again in 2014. And a lot of the growth we had in 2014 really was a massive building of inventories, which is often the case when stock prices are high and top line is decelerating.
The economy enters 2015 in very weak shape. None of the big ticket sectors are doing well. Capital spending is declining, being paced by extreme weakness in oil & gas drilling, which has really been the driving force in manufacturing over the last four years. The best you can say about the housing sector is that it is flat. Not a very important sector..."

at http://www.zerohedge.com/news/2015-02-27/monetary-policy-bankrupt-dr-lacy-hunt-warns-bonds-not-stocks-are-good-economic-indic

China Just Sided With Russia Over The Ukraine Conflict

"When it comes to the Ukraine proxy war, which started in earnest just about one year ago with the violent coup that overthrew then president Yanukovich and replaced him with a local pro-US oligarch, there has been no ambiguity who the key actors were: on the left, we had the west, personified by the US, the European Union, and NATO in general; while on the right we had Russia. In fact, if there was any confusion, it was about the role of that other "elephant in the room" - China.
To be sure, a question few asked throughout the Ukraine civil war is just whose side is China leaning toward. After all the precarious balance of power between NATO and Russia had resulted in a stalemate in which neither side has an obvious advantage (even as the Ukraine economy died, and its currency hyperinflated, waiting for a clear winner), and the explicit or implicit support of China to either camp would make all the difference in the world, not to mention the world's most formidable axis.
Today we finally got the answer, and the winner is... this guy:
Xinhua reported that late on Thursday Qu Xing, China's ambassador to Belgium, was quoted as blaming competition between Russia and the West for the Ukraine crisis, urging Western powers to "abandon the zero-sum mentality" with Russia.
Cited by Reuters, Xing said that Western powers should take into consideration Russia's legitimate security concerns over Ukraine.
Reuters' assessment of Xing speech: "an unusually frank and open display of support for Moscow's position in the crisis."

at http://www.zerohedge.com/news/2015-02-27/china-just-sided-russia-over-ukraine-conflict

Panic in Ukraine Over Food, Empty Stores and Protests; Strategic Food Reserve Empty

"Strategic Food Reserve Empty

A curious thing happened today. To quiet protests over food, president Petro Poroshenko ordered the minister of the food reserve to fill the shelves of stores with flour, sugar, canned meat, and buckwheat from the reserve. 

Well guess what? There was no food in the reserve. It has either been looted (like the vanishing gold), or it was fed to the army. 

Here is a nice translation from Russian by J. Hawk: Ukraine's Strategic Food Reserve...Runs Out Of Food..." 

at http://globaleconomicanalysis.blogspot.com/2015/02/panic-in-ukraine-over-food-empty-stores.html#wOXbVj73vc1uxxzx.99

Putin Spokesman Says Nemtsov Murder Was "100% Provocation"

"Just a few short hours after the terrible murder of Russian opposition politician and outspoken Putin critic Boris Nemtsov, US' John Kerry was quick to condemn the actions of the "reformer" and demand Russia's "expeditious investigation," and President Obama has since issued a statement "admiring [Nemtsov's] struggle against corruption." The undertone was clear - 'Putin did it'. Furthermore, President Poroshenko has claimed that Nemtsov was on the verge of "exposing direct Russian links to the Ukraine conflict." As many realise the futility of trying to determine whether it is a Russian act, a CIA act meant to look like a Russian act, or a Russian act meant to look like a CIA act, Putin spokesman Dmitry Peskov says the Nemtsov murder was "100% provocation... It looks like a contract killing."

at http://www.zerohedge.com/news/2015-02-28/putin-spokesman-says-nemtsov-murder-was-100-provocation

Marc Faber : 50/50 Chance Greece will Default

"Marc Faber, Editor and Publisher, The Gloom, Boom & Doom Report talks about ongoing debt talks between Europe and Greece.

“In my view it’s inconceivable under any condition that Greece will be able to repay their debts. That should be clear. I’m more interested in what happens if Greece leaves the EU or is kicked out of the EU, which I think would be the right thing,” said the editor and publisher of The Gloom, Boom & Doom Report..."

at http://www.marcfabernews.com/2015/02/marc-faber-5050-chance-greece-will.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MarcFaberBlog+%28MARC+FABER+BLOG%29#.VPINPfnQqm4

Another Reason To Worry About The Stock Market

"The world is full of “carry trades” these days, and that’s a really bad thing.
In general terms, a carry trade involves someone borrowing money cheaply in one currency or market and investing the proceeds in something else that offers a higher yield. The strategy is profitable as long as the currency being borrowed doesn’t rise by more than the spread between the cost of the loan and the income from the investment.
The yen carry trade, in which institutions borrowed Japanese yen for next to nothing and bought emerging market bonds yielding quite a bit more, was the dominant version for most of the past decade. It paid off nicely when the yen plunged in value last year. Then the dollar carry trade took over, with about US$9 trillion being borrowed worldwide and invested in everything from Brazilian bonds to Chinese infrastructure. That hasn’t worked out so well, since the dollar is up lately by more than enough to offset the income from those investments. The impact of this tidal wave of negative cash flow will be felt going forward and could be serious, since $9 trillion is about the size of the Chinese economy.
But the really interesting — and potentially even more dangerous — carry trade is happening here at home, where public companies are issuing low-interest-rate debt and using the proceeds to buy back their shares. When the bond interest is lower than the dividends on the stock that’s being purchased and retired, this is a cash flow positive trade — with the added benefit of pushing up the share price and therefore company execs’ year-end bonuses. Check out the following two charts for a sense of the magnitude of this trade:
Share buybacks Apple and IBM
Share buybacks
So what happens if US equities have the kind of bear market that usually follows their recent spike to record levels? Well, the companies that have borrowed heavily will still owe interest on their bonds, but the shares they’ve bought will be worth 20%-30% less. This negative change in their net worth (real if not in terms of financial reporting) might make their shares even less attractive and put extra downward pressure on them, and so on, until a garden-variety bear market turns into something nastier.
This in turn will throw the “wealth effect” (in which higher share prices lead to higher consumer spending) into reverse, possibly turning a manageable slowdown into another Great Recession.
That’s of course unacceptable for the people running today’s governments, for whom rising asset prices are now up there with the war on terror and lobbyist pay scales in terms of untouchability. So lately even minor stock price corrections have been met with an army of Fed, Treasury and congressional talking heads promising fast action to keep the gravy train going.
All of which makes current speculation about Fed interest rate policy seem a bit silly. The truth of the matter is that interest rates, monetary policy in general and pretty much every other government policy is now dictated by the need to keep the asset bubble from bursting."
at http://dollarcollapse.com/stock-prices/another-reason-to-worry-about-the-stock-market/

Paul Craig Roberts: World Annihilation Threatened – Trust Now Shattered Between Russia And U.S.

"With the eyes of the world still focused on the war in Ukraine, today Dr. Paul Craig Roberts warned King World News that confidence between Russia and the United States has been destroyed and the specter of nuclear Armageddon now stalks the Earth.  This is an ominous warning from the former U.S. Treasury official as he is warning global leaders the world is headed for nuclear annihilation.

February 27 (King World News) – This week I was invited to address an important conference of the Russian Academy of Sciences in Moscow. Scholars from Russia and from around the world, Russian government officials, and the Russian people seek an answer as to why Washington destroyed during the past year the friendly relations between America and Russia that President Reagan and President Gorbachev succeeded in establishing..."

at http://kingworldnews.com/paul-craig-roberts-trust-now-shattered-russia-u-s-world-annihilation-threatened/

Is This The Greatest Threat To The World?

"With the Dow near 18,200, crude oil still below $50 and gold on the move, today a legend in the business sent King World News a powerful piece warning about one of the greatest threats to the world that would violently impact every major market and individual around the globe.
From Art Cashin's notes:  "Stagnant Reserves – In his most recent "Thoughts From The Frontline", my good friend, John Mauldin, touches on the anomaly that has frustrated the Fed in trying to get the economy kicking in.  It is the velocity of money – or, more correctly, the non-velocity of money in today's economy.  Here's a bit from John's note:
Yet the US monetary base has expanded significantly, and there has been no real increase in inflation, and the dollar is actually getting stronger. “So what’s the problem?” Mr. Krugman asks. Inflation is brought about by not just an expansion of the monetary base but also by a stable, concurrent rise in the velocity of money. 
It’s complicated, I admit. I have devoted more than a few letters to the concept of the velocity of money. The current period of low inflation has been caused by a rather dramatic fall, over the last eight to ten years, in the velocity of money. As I predicted almost five years ago, the Federal Reserve was able to print far more money than anyone could imagine without the threat of inflation rearing its head.
The problem is that the velocity of money is a very slow-moving statistic. It is what we call mean-reverting, in that the velocity of money can’t rise to the heavens unless you have a Weimar Germany-type situation, and it can’t fall to zero. It oscillates over long periods (think decades) around an average or mean. 
Right now the velocity of money is falling, which allows the US Fed to have a very loose monetary policy without having to worry about inflation. When the velocity of money begins to rise, the Fed will have to lean against what could quickly turn into soaring inflation with a tighter monetary policy than it otherwise would have, because of its recent, extreme episodes of quantitative easing. Think Paul Volcker in the early ’80s, turning the screws on 18% inflation. That was not exactly a fun time.
Of course, economists think that we can avoid any big mistakes. But sadly, there is no such thing as a free monetary lunch. Today’s quantitative easing (in a period of reduced velocity of money) will mean tomorrow’s much tighter monetary policy – or much higher inflation. Or both.
Art Cashin continues: If the velocity of money were to pick up, the Fed would be in a very precarious position.  They might have to raise reserve requirements, which could be like taking a two by four to the economy.  Maybe we'll explore more on the topic next week..."

at http://kingworldnews.com/greatest-threat-world/

Andrew Maguire – LBMA Paper Ponzi To Be Crushed As Gold And Silver Markets Change Forever!

"Today London metals trader Andrew Maguire shared major news with King World News about the war in the gold and silver markets.  Maguire also gave details about the launch of the eargerly-anticipated exchange for physical trading and also spoke about why this will forever crush the LBMA paper Ponzi system.
New Exchange Launch & Major News Regarding China
Andrew Maguire:  “This (new exchange being launched) is something so enormous and pivotal in terms of the way the whole bullion banking system is going to be changing.  This is a fantastically exciting development.  But first, we got some really good news today confirm the competing Chinese fix that you and I have discussed on many occasions where we said that the Chinese were planning an official Beijing/Shanghai Gold Fix, with silver soon to follow.  Today we got confirmation of this..."

at http://kingworldnews.com/andrew-maguire-lbma-paper-ponzi-crushed-gold-silver-markets-change-forever/

Wednesday, February 25, 2015

The Magical Debt Disappearance

"Submitted by Pater Tenebrarum via Acting-Man blog,

Corporate Leverage Gets Corzined …

A friend pointed us to a post by Macroman that discusses revisions to the flow of funds data published by the Fed that have apparently already been made a few months ago. Nothing about them seems remarkable, until one gets to corporate non-financial debt. Apparently, all that debt that has been taken on by companies in recent years has suddenly disappeared, as if by magic.

We admittedly don’t know what motivated the revisions and why the data now show such a huge discrepancy to what they showed before, but the change is truly remarkable. Macroman shows a “before” and “after” chart combination of US non-financial corporate debt as a percentage of GDP that is really quite stunning. It looks like this:

nf corp liabilities
The new and improved corporate debt picture, following some “benchmark revision” data fiddling, compared to the previous, slightly more concerning debt picture – by Macroman, click to enlarge.

The Greenspan and Bernanke credit bubbles apparently never happened; it was all just a bad dream. From eyeballing the difference between the revised and the original data, some 14.5% of GDP, or$2.568 trillion in corporate debt have evaporated into thin air. They existed one day, and abracadabra, ceased to exist the next. Pure magic.
As Macroman comments:
“[…] it’s hard to know what to make of this, as the magnitude of the revision renders the data literally unbelievable. As the saying goes, there’s lies, damned lies, and statistics…
(emphasis added)
Indeed, it is really extremely difficult to believe. How can almost $2.6 trillion in debt just vanish? It seems they been Corzined. Unfortunately, there is no good explanation to this we know of at this time. If anyone has one that sounds like it might make sense, we’d really love to hear it.
As our friend remarked, in light of this sudden debt evaporation one can of course immediately stop worrying about all that junk debt out there (of which more than $2 trillion have reportedly been issued – or maybe not? – over the past several years). Buy as much junk as your heart desires, there is now a shortage of the stuff! We’re positively debt-starved!

Conclusion:

We’re actually not really sure yet what the proper conclusion is, but this is certainly quite astonishing, to say the least. The video excerpt below may by now be suffering a bit from over-exposure, but it seems rather appropriate to the situation."

at http://www.zerohedge.com/news/2015-02-25/magical-debt-disappearance

If Debt Was The Problem…

"Confounded Interest just posted a nice summary of a McKinsey report on the growth of global debt during what some persist in calling the “great deleveraging.” Turns out that since the crisis of 2008, debt has actually risen by $57 trillion, and the ratio of debt to GDP is up 17 percentage points to 286%. Meanwhile, central banks are monetizing 100% of newly-issued sovereign debt.
The obvious response to this is 1) wow, nothing has been fixed; in fact just the opposite, and 2) these stats, horrendous as they are, are incomplete because they don’t include unfunded liabilities of governments and private pensions, which are just as real as any other kind of debt.
But unfunded liabilities must be getting better, what with the stocks and bonds in pension fund portfolios soaring lately. Right? Since that’s an effortless Google search, that’s what I did. And the results were both counterintuitive and scary. It seems that even with pension fund investment portfolios booming, obligations to future retirees are rising even faster, making these entities even more underfunded today than in 2007. Here’s a sampling of the headlines just from February, in the order they appear in the search window:
Absent from this list is the US federal government’s number, though that’s also easy to find. From Forbes: You Think The Deficit Is Bad? Federal Unfunded Liabilities Exceed $127 Trillion. That’s about 6 times the reported federal debt.
Now, easy money advocates argue that the solution to this and all other unbalanced economic equations is to borrow and spend enough new cash to get asset prices up and put people back to work. But stocks and bonds are currently at record highs and the unemployment rate is below 6% (peak-of-the-cycle kinds of numbers that have historically preceded corrections in which investment returns and tax receipts both plunge, raising unfunded liabilities).
So it looks like we’ve thrown our best punch and the problem is still standing there, wondering if that’s all we’ve got. Which leaves the US and the rest of the world — where debt and unfunded liabilities also continue to rise — with the question: If debt was the thing that nearly destroyed the global financial system in 2008 and debt — both narrowly and broadly defined — is way up since then, what happens in the next downturn? The answer is who knows, because this is uncharted territory both in terms of the size of the imbalances and governments’ policy responses.
The only thing that’s certain is that there are more cities, states and related pension funds poised to blow up than ever before."
at http://dollarcollapse.com/debt/if-debt-was-the-problem/

Thursday, February 19, 2015

Biggest Nordic Buyout Fund Sees "Asset Bubbles Wherever We Look"

""We’re more leveraged today than in 2006-2007," warns Thomas von Koch - managing partner at EQT, the largest buyout fund in the Nordic region, adding that "there are financial bubbles being built up and how they’ll be solved, I don’t know." As Bloomberg reports, von Koch concludes, an unprecedented era of monetary stimulus is inflating asset prices across markets to extreme levels, with history offering little help in predicting how it will all end - "The problem is global, not just for Europe. It’s the asset bubbles in general that concern me. It’s wherever we look."
The biggest buyout fund in the Nordic region says an unprecedented era of monetary stimulus is inflating asset prices across markets to extreme levels, with history offering little help in predicting how it will all end.

“There are financial bubbles being built up and how they’ll be solved, I don’t know,” Thomas von Koch, managing partner at EQT Partners in Stockholm, said in an interview. “The problem is global, not just for Europe. It’s the asset bubbles in general that concern me. It’s wherever we look.”

“I can virtually toss those textbooks in the fire,” said von Koch. From an investor perspective, the development means stocks that track economic cycles are less appealing, he said..."

at  http://www.zerohedge.com/news/2015-02-19/norways-biggest-buyout-fund-there-are-asset-bubbles-wherever-we-look

It's Official: Global Economy Back In Contraction For First Time Since 2012 According To Goldman

"After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator "swirlogram" somewhat buoyant was that "Growth" measured in absolute terms had remained slightly positive. Not any more: according to Goldman's latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.
As the far simpler 2-D chart below shows, the Goldman GLI mometum indicator is now below 0 for the first time since 2012. It also shows what the momentum of the Global Leading Indicator looks like compared to Global industrial production, which is sure to follow below the X-axis in the coming weeks..."

at http://www.zerohedge.com/news/2015-02-19/its-official-global-economy-back-contraction-first-time-2012-according-goldman

Economy Has Not Recovered-John Williams

"Renowned economist John Williams says forget the happy talk about the so-called “recovery”—it ain’t happening.  Williams contends, “I wish I could say things are booming, but indeed they are not. . . . The GDP in the last three quarters, if you believe what they put out, is the strongest economic growth seen in more than a decade.  That’s not the common experience. . . . The consumer is in terrible liquidity straights. . . . The reality is the economy has not recovered.” 
Williams goes on to say, “In the fourth quarter in November and December, the traditional holiday season was the worst Christmas shopping season since the economic collapse in 2008.  January (2015) is off to an even worse start.  It looks like the first quarter is going to contract before and after adjusted for inflation, and that is very bad news. . . . You got retail sales, industrial production that’s going to be weak, and the housing sales numbers have never recovered . . . Any measure you look at is still well below coming into the recession, and again that’s tied to the consumer’s liquidity.”
So, why does America seem to be doing much better than the rest of the world?  Williams explains, “What’s been at work here is the perception that the U.S. economy is recovering, and the Fed doesn’t need to provide any more quantitative easing (money printing).  The dollar has strengthened, and as you see, our major trading partners moved towards quantitative easing because of the recessions they have.  Well, guess what?  We have the same problems as our trading partners.  We are still in recession.  They just do the numbers a little more honestly. We’re not done with quantitate easing. . .   As it becomes clear that the U.S. economy is still in recession, or a renewed recession, the speculation will come back that the Fed has to renew its quantitative easing or expand it . . . that will hit the dollar very hard.  As the dollar sells off, you are going to find oil prices spiking a new, inflation spiking a new and eventually the rest of the world will dump the dollar.”
Williams goes on to say, “The underlying fundamentals for the dollar just could not be worse. Fiscal conditions have not improved.  Deficit numbers last year were small according to headline numbers, but if you look at it with generally accepted accounting principles, it was still about $6 trillion . . . per year.

at http://usawatchdog.com/economy-has-not-recovered-john-williams/

This Remarkable Illustration Warns There Is Serious Turbulence Ahead For Major Markets

"A new worry is signaled from the spread between the bulls and bears which rose to 42.5%. That is up nearly 10% from the two prior readings of 37.3% and 32.7%. The difference is also just above the 41.5% that ended December and below the 42.7% spread from mid-November. Both were trading tops so concerns increase. Differences over 30% are a worry and above 40% signal major caution. At the mid-Oct lows the spread was only 17.1% and favorable for accumulation in a rising stock environment. In Aug-2013 it was 13.4%. The bears haven't outnumbered bulls (a negative spread) since October 2011."
King World News note:  See the remarkable illustration below which shows the stock market bulls outnumber the bears by one of the largest totals in the past 5 years!"
Sentiment ChartKWN II 2 2:18:2015

at http://kingworldnews.com/remarkable-illustration-warns-serious-turbulence-ahead-major-markets/

Wednesday, February 18, 2015

Are We Headed Into The Most Shocking Panic In World History?

"Today a 40-year market veteran sent King World News an incredibly important piece that warns we may now be headed into the most shocking panic in world history.  This piece exclusively for KWN also exposes the continued mainstream media and government lies as the world stands on the edge of a precipice..."

at http://kingworldnews.com/headed-shocking-panic-world-history/

50-Year Veteran Says Paul Craig Roberts Is Right – Warns 2015 Will Be The Year Of The Great Reckoning

"With the world focused on news out of Greece and Ukraine, today one of the greats in the business told King World News that the West's great charade is coming to an end.  The 50-year veteran also addressed the strange timing of the raid in the gold and silver markets and more..."

at http://kingworldnews.com/50-year-veteran-says-paul-craig-roberts-right-warns-2015-will-year-great-reckoning/