NEW SERIES RELEASE MONETARY MALPRACTICE AVAILABLE NOW MONETARY MALPRACTICE: Deceptions, Distortions and Delusions MONETARY MALPRACTICE: Moral Malady MONETARY MALPRACTICE: Dysfunctional Markets
NOW SHOWING HELD OVER Currency Wars Euro Experiment Sultans of Swap Extend & Pretend Preserve & Protect Innovation Showings Below
FREE COPY... Current Thesis Advisory: CONTACT US
|
Weekend Nov. 23rd , 2013 |
SEE VIDEO: The New Depression & The Corruption of Capitalism W/ Richard Duncan What Are Tipping Poinits? |
![]()
Reading the right books? >> Click to Browse << We have analyzed & included Book Review- Five Thumbs Up
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
"BEST OF THE WEEK " |
Posting Date |
Labels & Tags | TIPPING POINT or 2013 THESIS THEME |
|
MOST CRITICAL TIPPING POINT ARTICLES THIS WEEK - November 17th - November 23rd | ||
RISK REVERSAL | 1 | ||
LEVERAGE LOANS - Now 55% "COV-LITE" versus 29% Prior to the Financial Crisis As we warned two months ago, the bubble in credit markets (which if you ask anyone at the Fed, except Jeremy Stein, does not exist) is nowhere more evident than in the explosive growth of so-called cov-lite loans. While total volumes of cov-lite loans are already at record, as the FT reports, we now have 55% of new leveraged loans come in “cov-lite” form, far eclipsing the 29% reached at the height of the leveraged buyout boom just before the financial crisis. LBO multiples have reached record highs and demand for secutizations of these levered loans (CLOs) has surged on the back of the Fed's repressive push of investors into more-levered firms and more-levered instruments.
So wondering where the leverage is building this time? Well, record high margin debt in stocks and record high exposure to the riskiest (and least protected) credit structures once again... but it's different this time (as Moodys told us).
|
11-20-13 | ANALYTICS RISK |
1 - Risk Reversal |
FAILURES - Market, Policy and Institutional The Capital-Flow Conundrum 11-08-13 Eswar Prasad Brookings In recent months, emerging economies have experienced capital-flow whiplash. Indications that the US Federal Reserve might “taper” its quantitative easing (QE) drove investors to reduce their exposure to emerging markets, sharply weakening their currencies and causing their equity prices to tumble. Now that the taper has been postponed, capital is flowing back in some cases. But, with little influence, much less control, over what comes next, emerging economies are still struggling to figure out how to protect themselves from the impact of a Fed policy reversal. When the Fed initially hinted at its intention to taper QE, policymakers in some emerging economies cried foul, but were dismissed by advanced-economy officials as chronic complainers. After all, they initially rejected the very policies that they are now fighting to preserve. But emerging-market policymakers’ criticisms do not reflect an inconsistent stance; in both cases, the crux of their complaint has been volatility. They have already attempted to erect defenses against the potentially destabilizing effects of advanced-country monetary policy by
But this approach fails to address the underlying issue – and misdiagnosing the problem could have far-reaching consequences, not only leading to ineffective solutions, but also possibly causing severe distortions for specific economies and the global financial system as a whole. In order to design effective remedies, it is useful to distinguish among three types of failures that impede financial-market functioning. The three types of failures that impede financial-market functioning. MARKET FAILURES First, there are market failures, which occur when, for example,
POLICY FAILURES Second, there are policy failures, which occur when
INSTITUTIONAL FAILURE The third – and currently most problematic – failure is one of national or international institutions. MONETARY DEPENDENCY Using monetary policy to compensate for deficiencies in other policy areas constitutes an institutional breakdown: monetary policymakers are not necessarily getting it wrong, but they are constrained by the configuration of other policies. Domestic monetary policy has become the first and last line of defense against growth slowdowns and financial panics, enabling policymakers to avoid pursuing other important, but far more difficult measures. Using monetary policy to compensate for deficiencies in other policy areas constitutes an institutional breakdown: monetary policymakers are not necessarily getting it wrong, but they are constrained by the configuration of other policies. GLOBAL GOVERANCE FRAMEWORK The inadequacy of the current framework for global governance compounds the problem. The grim reality is that, with financial markets becoming increasingly interconnected, monetary-policy measures taken by any of the major economies have international spillover effects. An effective governance mechanism or reliable institution is needed to help emerging markets cope with these effects. The lack of effective global economic governance has important implications for capital flows. Emerging-market policymakers believe that they lack recourse to safety nets that would cushion the impact of volatile flows. Their efforts to “self-insure,” by, say, building up their foreign-exchange reserves, perpetuate global economic imbalances. So how can policymakers address these failures? There has been some progress at the international level on regulatory reforms aimed at addressing market failures, though such efforts have been limited by strident resistance from financial institutions. Solutions for policy failures are not difficult to discern.
Moreover, the functioning of emerging-economy financial markets should be improved, with policies aimed at
While the right policies cannot eliminate risk, they can ameliorate the cost-benefit tradeoff from capital flows. Fixing institutional failures is the most important – and the most difficult – step. Successful reform requires, first and foremost, finding the right mix of domestic policies. In the advanced economies, in particular,
In many of the troubled emerging economies, however, monetary policy has shouldered the burden of
This balancing act is difficult to maintain, leaving these economies vulnerable when the external environment turns unfavorable. In India, for example, increasing productivity and long-term growth require fiscal discipline and a raft of financial- and labor-market reforms. But the central bank is being asked to do all the heavy lifting. In other emerging markets, too, the main challenge is to ensure that all macroeconomic and structural policies advance common goals. At the same time, the governance structure of multilateral institutions like the International Monetary Fund must be reformed, in order to bolster their legitimacy in emerging markets. Otherwise, these institutions will remain ineffective in confronting collective problems related to macroeconomic-policy spillovers, and in providing insurance against crises. Policymakers in advanced and emerging countries alike should Focus on the underlying failures that destabilize their economies and impede growth, rather than trying to treat the symptoms by manipulating monetary policy or capital controls. Unless they are supported by strong institutional structures at all levels, such measures will prove futile in managing capital flows.
|
11-18-13 | GMTP A12 | 9 - Global Governance Failure |
LEADERSHIP - 'Value Transformer' Politicians are avoiding politics OR the voters are rejecting The Three Types Of Politicians 11-13-13 OfTwoMinds Charles Hugh Smith Solving profoundly structural problems by establishing a new foundation of values that most can embrace positively is the hallmark of leadership. CARETAKERS maintain the status quo, a task that boils down to throwing a fiscal bone to every politically powerful constituency and doing so in a manner that does not create career-threatening blowback. Either those with these leadership skills are avoiding politics or the voters are rejecting them in favor of caretakers who are incapable of challenging political powerful constituencies or finding common ground for desperately needed systemic reforms.
|
11-18-13 | GMTP A12 | 9 - Global Governance Failure |
POLITICAL FAILURE - The Consequences Of A Dysfunctional Political System The Consequences Of A Dysfunctional Political System 11-18-13 Marc Faber via The Daily Reckoning blog, As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.' It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track. Some readers will, of course, ask what this expose about the political future has to do with investments. It has nothing to do with what the stock market will do tomorrow, the day after tomorrow, or in the next three months. But it has a lot to do with the future of the US (and other Western democracies where socio-political conditions are hardly any better). I have written about the consequences of a dysfunctional political system elsewhere. In May 2011 I explained how expansionary monetary policies had favoured what Joseph Stiglitz called 'the elite' at the expense of ordinary people by increasing the wealth and income of the 'one percent' far more than that of the majority of the American people. I also quoted at the time Alexander Fraser Tytler (1747-1813), who opined as follows: 'A democracy cannot exist as a permanent form of government. It can only exist until voters discover that they can vote themselves largesse from the Public Treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the Public Treasury with the result that a democracy always collapses over loose fiscal policy, always followed by dictatorship'. Later, Alexis de Tocqueville observed: 'The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.' To be fair to Mr. Obama, the government debt under his administration has expanded at a much slower pace in percentage terms than under the Reagan administration and the two Bush geniuses. In fact, as much as I hate to say this, Mr. Obama has been (or has been forced to be) a fiscal conservative. However, what 18th and 19th century economists and social observers failed to observe is that democracies can also collapse over loose monetary policies. And in this respect, under the Obama administration, the Fed's balance sheet has exploded. John Maynard Keynes got it 100% right when he wrote: 'By a continuing process of inflation, Governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some... 'Those to whom the system brings windfalls...become 'profiteers' who are the object of the hatred... The process of wealth getting degenerates into a gamble and a lottery... Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.' The Fed takes great pride in the fact that US household wealth has now exceeded the 2007 high. However, I was pleasantly surprised when I recently attended a presentation by Larry Lindsey, at my friend Gary Bahre's New Hampshire estate. He unmistakably showed, based on the Fed's own Survey of Consumer Finance and Flow of Funds, that the recovery in household wealth has been extremely uneven. Readers should focus on the last column of Table 1, which depicts the change in household wealth between 2007 and 2013 by wealth percentile. As can be seen, the bottom 50% of the population is still down more than 40% in terms of their 'wealth' from the 2007 high. (Lindsey is a rather level-headed former Member of the Board of the Governors of the Federal Reserve System, in which capacity he served between 1991 and 1997.) Besides the uneven recovery of household wealth among different wealth groups, a closer look at consumer credit, which is now at a record level, is also revealing. Furthermore, consumer credit as a percentage of disposable personal income is almost at the pre-crisis high. But what I found most interesting is how different income and wealth groups adjusted their outstanding total debt (including consumer credit, mortgage debt, etc.) following the crisis. Larry Lindsey showed us a table - again based on the Fed's own Survey of Consumer Finance and Flow of Funds data - which depicts total debt increases and decreases (in US$ billions) among these different income and wealth groups. I find it remarkable that the lower 40% of income recipients and the lower 50% of wealth owners actually increased their debts meaningfully post-2007. In other words, approximately 50% of Americans in the lower income and wealth groups who are both voters and consumers would seem to be more indebted than ever. A fair assumption is also that these people form the majority of the government's social benefits recipients. Now, since these lower income and wealth groups increased their debts post-2007 and enjoyed higher social benefits, they were also to some extent supporting the economy and corporate profits. But what about the future? Entitlements are unlikely to expand much further as a percentage of GDP, and these lower-income recipients' higher debts are likely to become a headwind for consumer spending. Simply put, in my opinion, it is most unlikely that US economic growth will surprise on the upside in the next few years. It is more likely there will be negative surprises.
|
11-18-13 | GMTP A12 | 9 - Global Governance Failure |
TO TOP | |||
MACRO News Items of Importance - This Week | |||
GLOBAL MACRO REPORTS & ANALYSIS |
|||
US ECONOMIC REPORTS & ANALYSIS |
|||
CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES | |||
FEDERAL RESERVE - False Media Reporting Federal Reserve Source: QE May Increase 26% in 2014 11-20-13 Simon Maierhofer How much QE is enough? Based on the latest statement by a Federal Reserve president, the Fed may beef up QE by another 26% in 2014. However, there’s also another interpretation, which would nail the financial media for shoddy reporting. Charles Evans is the ninth president and chief executive officer of the Federal Reserve Bank of Chicago. He tweeted the following on Tuesday, November 19: “Our purchases will continue to be open ended. We may need to purchase 1.5 trillion in assets until January 2015” As a Federal Reserve president Mr. Evens is fluent in the art of sending cryptic messages. The above tweet is no different. Deciphering the Modern Day Enigma What could Mr. Evans have meant? Currently the Federal Reserve is buying $85 billion worth of assets per month. That’s $1.02 trillion per year or $1.19 trillion until January 2015. Going from the current pace of $1.19 trillion to $1.5 trillion in asset purchases is an increase of 26%. Is Mr. Evans saying that the Fed may have to further beef up QE? Enough to Buy 8% of ALL U.S. Stocks Every Year $1.5 trillion is an incredible amount of money. How incredible? According to the World Bank, the total market capitalization of the U.S. stock market was $18.67 trillion in 2012. Total market cap includes the S&P 500, Dow Jones, and every other U.S. index you can think of. '$1.5 trillion is enough to buy 8% of all U.S. traded stocks. No wonder the S&P 500 and Dow Jones have nowhere to go but up. Comparing the Fed’s current $4 trillion balance sheet with the total U.S. market cap (projected to be $21.4 trillion in 2013) almost allows the conclusion that the Federal Reserve conceivably financed 17% of all U.S. stock purchases. When considering the size of the Fed’s balance sheet and active purchases in correlation to the total U.S. stock market, it seems almost inconceivable for the S&P 500 ETF (NYSEArca: SPY), Dow Jones Diamonds ETF (NYSEArca: DIA) and any other broad market ETF or index to catch a sustainable down draft. Media Omission May Solve The 'Evans Enigma' There is another explanation for the $1.5 trillion ‘Evans Enigma.’ The Federal Reserve is already buying more than $85 billion worth of assets every single month, but the financial media largely omits the real scope of all QE-like programs. How much is the Federal Reserve really spending every single month? REFERENCE ARTICLE --- Glaring but Misunderstood QE – How Much the Fed is Really Spending QE1, QE2, QE3, expiring Operation Twist, and now QE4. Which of those programs are "sterilized" (non-inflationary) and which ones devalue the dollar? If you've lost track, here's a quick visual summary. Will Operation Twist be replaced by outright QE was a question addressed here early in December. As it turns out, the Fed decided to do just that. We now have multiple layers of QE working simultaneously. What’s the total amount being spent and will inflation finally take off? QE Tally There are three official tranches of quantitative easing (QE): 1) QE3, announced on September 13, 2012. The Federal Reserve will buy $40 billion per month worth of mortgage-backed securities. 2) QE4, announced on December 12, 2012. The Federal Reserve will buy $45 billion per month worth of longer term Treasuries (corresponding ETF: iShares Barclays 20+ Treasury ETF – TLT). QE4 will be replacing Operation Twist in 2013. Operation Twist is considered “sterilized” or cash neutral QE. Operation Twist simply reshuffled the balanced sheet (sell shorter term in favor of longer term maturities). It did not expand the balance sheet. Unlike Operation Twist, QE4 will be financed by “non-sterilized” or freshly printed money. This process increases the Federal Reserve’s balance sheet and the amount of money in circulation. 3) Reinvestment of maturing securities. In a December 12 press release, the Federal Reserve stated: “The Committee is maintaining its existing policy of reinvesting principal payments from its holdings mortgage-backed securities and, in January, will resume rolling over maturing Treasury at auction.” This amounts to roughly $25 billion/month of sterilized QE. In total, the Federal Reserve will buy $110 billion worth of Treasuries and mortgage-backed securities every month until the unemployment rate drops below 6.5% and inflation remains below 2.5%. The chart below illustrates QE3, QE4, and reinvestments separately and how the three layers combined compare with QE1 and QE2. |
11-26-13 | US MONETARY | CENTRAL BANKS |
QUANTITATIVE EASING -Look for QE to 'Morph' to -> Quantitative Education Did Bill Dudley Just Unveil The Fed's Real Taper "Scapegoat" Plan? 11-20-13 Zero Hedge That the Fed has a problem is increasingly well known - despite the blather from the mainstream media that QE monetization can continue ad infinitum. Their problem, of course, is running out of government-provided liabilities to monetize (as deficits shrink and their ownership of the entire Treasury complex surges). They face other problems (as we have noted before) but the admission that they are boxed in would have major ramifications in the market's faith. So, how does the Fed, faced with the knowledge that they have created asset bubbles, broken the bond market, and are boxed in by their own excess still meet the market's undying desire to keep the flow going? Bill Dudley just, perhaps inadvertently, dropped a hint of the next 'market/scapegoat' for monetization - Student loans. Bear in mind that the "taper" is all about economic cover for a forced move the Fed has to make, because:
Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time... So they need a scapegoat!
Yes - Mr. Dudley - Very Very Rapid indeed... As we recently noted, student and car loans are responsible for 99% of all consumer credit created this year. Thank you Uncle Sam for making yet another generation of indentured servants who are studying geology on the taxpayers' dime, who will never get a job, who are up to their neck in debt, but at least can afford a Chevy Silverado. And while the Fed itself is responsible for the $1trillion bubble that has grown in easy cheap student loan debt... as the NY Fed disclosed moments ago, federal student loans officially crossed the $1 trillion level for the first time ever. Notably: the quarterly student loan balance has increased every quarter without fail for the past 10 years! It would appear Mr. Dudley is getting the joke that a younger generation burdened with debt is a problem...
and, as we notd here, the delinquency rate on student loans is soaring and has just hit an all time high of 11.83%, an increase of almost 1% compared to last quarter. Even according to just the government lax definition of delinquency, a whopping $120 billion in student loans will be discharged. Thank you Uncle Sam for your epically lax lending standards in a world in which it is increasingly becoming probably that up to all of the loans will end up in deliquency. and furthermore, as we noted here, of the 28 million Americans with federal student loans, 60%, or 17 million, don't pay the US government a single cent! Hopefully this highlights just how acute the severity of the student loan bubble is when stripped of all spin and mitigating rhetoric. ######################## So where does that leave us? 1. The Fed knows it needs to taper at some point - no matter what the rhetoric, unless the Fed admits the US is still in crisis mode, it risks losing its credibilit entirely (and control of the bond market) if it does not taper. 2. Smaller deficits mean the Fed is boxed in with its ability to monetize Treasuries and keep the "flow" flowing... How to escape that box? 1. Identify a bubble (but it cannot be an asset-bubble because if it were then the collateral chains and rehypothecation would contagiously collapse every other asset class). 2. Scapegoat that 'Bubble' as potentially a headwind for growth that needs to helped by government intervention. 3. "Help" the people by monetizing that bubble (and implicitly keeping the "flow" flowing) The Answer - as Bill Dudley just opined - is Student Loans. 1. A perfect bubble (forget about who created it) that needs to be popped by a responsible overseer 2. Lots of debt to monetize (keep the "flow" flowing) 3. A perfect excuse to slow Treasury buying (economy stabilizing, jobs stabilizing, stocks doing well) 4. A voter-friendly way of "helping" those in need that does nothing but enable more flow. How will they monetize Student Loans? No one is sure yet, but Dudley's comments on Human Capital
make one think of the book "The Unincorporated Man" The Bottom Line - Bill Dudley just floated a strawman that the Fed will taper Treasuries and the scapegoat will be Student Loans - which they will directly monetize to save us all from ourselves (and the problem they created). (as an addenda - we warn of the unintended consequence of this action - should they do it - that will merely encourage banks to securitize student loans and flip them to the government en masse, creating demand for moar student loans and enabling supply - ths growing the bubble ever larger). |
11-21-13 | US MONETARY | CENTRAL BANKS |
FED POLICY - The Unintended Consequiences of it all
The Unintended Consequences of ZIRP 11-16-13 John Mauldin Yellen's coronation was this week. Art Cashin mused that it was a wonder some Senator Essentially the papers make an intellectual and theoretical case for an extended period of We are going to start with an analysis by Gavyn Davies of the Financial Times. He writes
Yellen said as much in her testimony. In response to a question about QE, she said, "I The Fed have painted themselves into a corner of their own creation. They are clearly very But rather than let the market deal with the prospect of an end to an easy monetary policy
The new ideas that Bridgewater and everyone else are looking for are in the papers we are
This concept is key to understanding current economic thinking. The belief is:
The Misperception is:
Back to Davies:
Read that last sentence again. It makes no difference whether you and I might
On a side note, we are beginning to see calls from certain circles to think about also Off the top of my head I can come up with four ways that the proposed extension of ZIRP 1. The large losses from the continued FINANCIAL REPRESSION of interest rates on savers and pension funds Simply put, ultra-low interest rates mean that those who have saved money in whatever A new report from the McKinsey Global Institute examines the distributional effects of McKinsey estimates that households in the US have lost a cumulative $360 billion. This loss of household income requires tightened spending by retirees and means that those ZIRP means that the pension funds and insurance companies responsible for your annuities Most public pension funds work with some variation of the traditional 60-40 portfolio, that The next three graphs show what happens if interest rates are held near zero for three more
There is no question in my mind that many of my friends in the hedge fund and investment So the very policy of encouraging investors to move out the risk curve in fact reduces the returns on the risks taken, especially for the average investor who can't take advantage of the financial engineering available to sophisticated investors. Wall Street makes a bundle, and Main Street gets stuck with higher risks and lower returns. This is simply a trickle-down monetary policy by another name. The Federal Reserve
3. What happens when the VELOCITY OF MONEY turns around? We have no credible idea what drives movement in the velocity of money. As the chart shows below, it topped out in the '90s and has been dropping rather precipitously ever since. Charts that estimate the velocity of money back to the beginning of the 20th century show that we are close to all-time lows. One of the things we do know is that the velocity of money is mean reverting. It will begin to go back up. The fact that it is been dropping has allowed the Federal Reserve to print money in a rather aggressive fashion without stimulating inflation. When the velocity of money starts back up, inflation could become a problem rather quickly. I have no idea when that might happen or why it would start to happen anytime soon. But one day it will happen. That's just the way of things. Central banks that might be comfortable with 2-3% or even 4% inflation will find themselves dealing with much higher inflation than they had anticipated. Janet Yellen told us she would be capable of raising rates to fight inflation if need be, just as Volcker did. Let's hope she doesn't have to prove it. 4. The misallocation coming from rates being held below the natural rate of interests I have written on this in the past. When interest rates are held lower than the "natural rate Psst, Buddy, Would You Like to Buy a Model? As Jonathan Tepper and I write in Code Red, the Fed has elaborate models of the economy, Think about that for a minute. We are about to base our monetary policy once again on The best and the brightest assure us they have the situation under control. How's that As investors and money managers, we have no choice but to play the cards we are dealt. Demanding new cards is not an option when you don't own the dealer or make the rules of the |
11-19-13 | US MONETARY | CENTRAL BANKS |
Market Analytics | |||
TECHNICALS & MARKET ANALYTICS |
|
||
COMPLACENCY - VXV / VIX Ratio Sending A Clear Signal BofAML Warns "Don't Get Complacent" 11-17-13 BoAML In the near term, BofAML's Macneil Curry warns "we are growing a bit cautious/nervous, as US equity volatility is flashing a warning sign of market complacency that has often preceded a correction or a pause in trend." This 'red flag' is asterisk'd appropriately in the new normal with "to be clear, the balance of evidence is still very much US equity positive, but the near term downside risks have increased." Via BofAML's MacNeil Curry, We are bullish stocks, with the S&P500 targeting 1844 into year end [ZH: which sounds awfully close to an extraplotaed protjection of where the Fed's balance sheet implies year-end target]. However, in the near term, equity volatility warns of complacency and the potential for a correction lower. Specifically, the VXV/VIX ratio (VXV is the BBG ticker for 3m SP500 Volatility) has reached levels that have often led to a market pause/correction. While such a pullback would ultimately be corrective, Be Alert! |
11-18-13 | STUDY LIQUIDITY |
ANALYTICS |
CURRENCIES - Near Term $ Weakness on Euro & Sterling Strength & Yen Cross Weakness Dollar Remains Fragile 11-16-13 Marc To Market via ZH US$ WEAKNESS The US dollar looks vulnerable to additional losses. Generally speaking, the technical outlook for the greenback has soured and, in fact, warn of some risk accelerated losses in the period ahead. Nor can participants count on the economic calendar to stem the dollar's rout. The US has a slate of economic reports next week as the government catches up with the delay from the shutdown, but nothing to put the tapering back into December. EURO STRENGTH At the same time, while there is some expectation the ECB may do something more in a few weeks, following up on the recent repo rate cut, it is still far too early to expect the ECB to adopt what we have dubbed as "nuclear options", such as
Since it just
The euro's resilience in the face of the repo rate cut is demonstrated by its 1% rise on a trade-weighted basis, which is the key metric of its potential economic impact. EONIA is essentially unchanged (about half of a basis point lower) since the rate cut (which is one should have expected, as EONIA trades closer to the zero deposit rate than the repo rate). The euro has recorded higher lows for six consecutive sessions It tested the $1.35 in the second half of last week, but did not manage to close about it. This corresponds to a retracement objective of the nearly 5.5 cent decline beginning Oct 25. Assuming this level is convincingly breached, we see scope for the euro to rise 1% next week toward $1.3630. A move below $1.34 would weaken the outlook, but it probably requires a close below the 100-day moving average, which held on this basis, despite some intra-day penetration recently. It is near $1.3365 now. STERLING STRENGTH Sterling made new highs for the month ahead of the weekend and now seems poised to re-challenge what appeared to have been a double top made in Oct near $1.6260. Sterling had gone through the neckline (~$1.5890) early in the week, though not on a closing basis and the quickly rebounded, thanks to a favorable employment report and more optimistic BOE. Its resilience was reflected in the speed at which the market shrugged off the weak retail sales report (-0.7% rather than flat as the consensus expected). USDJPY The dollar did rise to two month highs against the yen and finished the last week with two consecutive closes (of the North American session) above the JPY100 for the first time in four months. Contrary to the general assertion, it cannot be simply attributed to Fed tapering ideas. The yen's 1.1% loss against the dollar occurred as the US premium over Japan (10-year interest rate differential) actually fell roughly 9 bp last week, slipping lower in three consecutive sessions before the weekend. The key test for the dollar is awaiting closer to the JPY100.60, the September high, which is just below the high from the second half of July set near JPY100.85. A break of this would bring into view the early July high near JPY101.55, which is the high posted since the decline from the year's high set in May (~JPY03.75) to the early June low (just below JPY94). Support has been established around JPY99 and it may require a break of that to signal a high is in place. YEN WEAKNESS Yen weakness is more pronounced on the crosses than against the dollar. Indeed, the yen's weakness appears to be, at least in part, not a dollar story. It has fallen nearly 2% on a trade-weighted basis so far this month. Sterling is trading a multi-year highs against the yen and euro is testing the year's high. The New Zealand dollar is testing the JPY84 level that held in both Sept and Oct. The Canadian dollar is at two-month highs against the yen. With the third arrow of Abenomics still apparently a work in progress, any appearance of relying on currency depreciation may face criticism by the US and Europe. Chinese official silence on the issue is noteworthy. Perhaps, its refrains from criticizing so as not to encourage criticism of its exchange rate policy, though that doesn't stop the PBOC from time to time of being critical of the US (market determined) exchange rate stance. US$ INDEX Turning to the dollar-bloc, from a technical perspective the US dollar is set to fall further. The head and shoulders topping pattern we discussed last week proved for naught. Even though the $0.8200 neckline was violated on Nov 12, there was no follow through selling and the Kiwi rebounded smartly (almost 2%) to vie with the euro as the strongest of the major currencies on the week. It seems that the rule here, and in sterling, is play the range until convincingly violated. If applied to the yen, it would seem to warn against playing the break out. AUSTRALIAN DOLLAR IN A RANGE BOUND BASING PROCESS The Australian dollar was largely range bound for most of last week, but this is increasingly looking like a base, rather than a pause before the next leg lower. The key may be the downtrend line drawn off the Oct 23 high near $0.9760 and Nov 6 high near $0.9545. It comes in near $0.9400 on Monday, though falls toward $0.9325 by the end of the week. Technically, a move above $0.9400 could spur another 1.0-1.5 cent advance. CANADIAN DOLLAR WEAKENESS The move above CAD1.05 on Nov14 appeared to have exhausted the USD bulls. A break now of CAD1.0430 (where a retracement objective and 20 day moving average lay) would confirm a near-term greenback high), and ideally CAD1.04, would suggest a move toward at least the lower end of the 5-month trading range (~CAD1.0250-CAD1.03). MEXICAN PESO The Mexican peso's 1.75% rise last week edged out the South African rand as the strongest of the emerging market currencies. The US dollar's decline brought it within a spitting distance of the uptrend line drawn off the Sept and mid- and late-Oct lows. It comes in near MXN12.91 on Monday. A break may signal another 1% decline in the dollar. Observations from the speculative positioning in the CME currency futures:
|
11-18-13 | CURRENCIES DRIVER$ |
ANALYTICS |
COMMODITY CORNER - HARD ASSETS | PORTFOLIO | ||
COMMODITY CORNER - AGRI-COMPLEX | PORTFOLIO | ||
SECURITY-SURVEILANCE COMPLEX | PORTFOLIO | ||
THESIS Themes | |||
2013 - STATISM |
|||
2012 - FINANCIAL REPRESSION |
|||
2011 - BEGGAR-THY-NEIGHBOR -- CURRENCY WARS |
|||
2010 - EXTEND & PRETEND |
|||
THEMES | |||
NATURE OF WORK -PRODUCTIVITY PARADOX | |||
GLOBAL FINANCIAL IMBALANCE - FRAGILITY & INSTABILITY | |||
CENTRAL PLANINNG -SHIFTING ECONOMIC POWER | |||
SECURITY-SURVEILLANCE COMPLEX -STATISM | |||
STANDARD OF LIVING -GLOBAL RE-ALIGNMENT | |||
CORPORATOCRACY -CRONY CAPITALSIM | |||
CORRUPTION & MALFEASANCE -MORAL DECAY - DESPERATION, SHORTAGES.. |
|||
MISINFORMATION - The Big Political Crime Against Americans Presently Being Committed
According to a whistleblower that has recently come forward, Census employees have been faking and manipulating U.S. employment numbers for years. In fact, it is being alleged that this manipulation was a significant reason for why the official unemployment rate dipped sharply just before the last presidential election. What you are about to read is incredibly disturbing. The numbers that the American people depend upon to make important decisions are being faked. But should we be surprised by this? After all, Barack Obama has been caught telling dozens of major lies over the past five years. At this point it is incredible that there are any Americans that still trust anything that comes out of his mouth. And of course it is not just Obama that has been lying to us. Corruption and deception are rampant throughout the entire federal government, and this has been the case for years. Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust. The whistleblower that I mentioned above has been speaking to John Crudele of the New York Post. In his new article entitled "Census ‘faked’ 2012 election jobs report", he says that the huge decline in the unemployment rate in September 2012 was "manipulated"...
Two years earlier, the Census had actually caught an employee "fabricating data", but according to this whistleblower the corruption at the Census Bureau goes much deeper than that...
Well, is it really such a big deal that some of the unemployment numbers were faked? After all, hasn't the unemployment rate been consistently going down anyway? Unfortunately, as you will see below, that is simply not the case. 1. "The Unemployment Rate Has Been Steadily Going Down" According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent. That sounds really good, and it would seem to imply that a higher percentage of the American people are now working. Sadly, that is not the truth at all. Posted below is one of my favorite charts. The employment-population ratio measures the percentage of the working age population that actually has a job. As you can see, this number fell dramatically during the last recession and since the end of 2009 it has remained remarkably flat. In fact, it has stayed between 58 and 59 percent for 50 months in a row... At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis. So are we in an "employment recovery"? Absolutely not, and anyone that tries to tell you that is lying to you. So how is the government getting the unemployment rate to go down? Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force. According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low... If the labor force participation rate was still exactly where it was at when Barack Obama was first elected in 2008, the official unemployment rate would be about 11 percent right now. People would be running around going crazy and wondering when the "economic depression" would finally end. But when people hear "7.3 percent", that doesn't sound so bad. It makes people feel better. Of course if you are currently unemployed and looking for a job that doesn't exactly help you. At this point there is intense competition even for minimum wage jobs in America. For example, according to Business Insider you actually have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening up in the Washington D.C. area...
2. "Inflation Is Low" This is another lie that government officials love to tell. In particular, the boys and girls over at the Federal Reserve love to try to convince all of us that inflation is super low because it gives them an excuse to recklessly print lots more money. But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy. And if we were being given honest numbers, they would show that. According to John Williams of shadowstats.com, if the U.S. inflation rate was still calculated the exact same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today. But the Federal Reserve certainly doesn't want everyone running around talking about "Jimmy Carter" and "stagflation" because then people would really start pressuring them to end their wild money printing schemes. And without a doubt, what the Fed is doing is absolutely insane. The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008... 3. "Quantitative Easing Is Economic Stimulus" How many times have you heard the mainstream media tell you something along these lines...
There is just one thing wrong with that statement. As I showed in a previous article, it is a total hoax. In fact, a former Federal Reserve official that helped manage the Federal Reserve's quantitative easing program during 2009 and 2010 is publicly apologizing to the rest of the country for being involved in "the greatest backdoor Wall Street bailout of all time"...
Yes, quantitative easing has most certainly helped Wall Street (at least temporarily). Meanwhile, median household income in the U.S. has fallen for five years in a row. Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare. Meanwhile, 1.2 million students that attend public schools in America are now homeless. In fact, that number has risen by 72 percent since the start of the last recession. 4. "Obamacare Is Going To Be Good For Middle Class Americans" There were three giant promises that were used to sell Obamacare to the American people...
Well, it turns out that all of them were lies. At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million. And so far only about 100,000 Americans have actually signed up for Obamacare, so that means that the number of Americans with health insurance has dropped by about 3.9 million since the beginning of October. Good job Obama. Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets. According to one study, health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare. And if you are a young man, you are going to get hit particularly hard. At this point, it is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent. But you don't have to be young to pay higher premiums. As I mentioned the other day, one couple down in Texas was recently hit with a 539 percent rate increase. 5. "The U.S. National Debt Is Under Control" The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer. But that is not the truth. The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined. Every single hour of every single day, our politicians are stealing about $100,000,000 from future generations of Americans. It is a crime so vast that it is hard to put into words, and it is literally destroying the economic future of this country. Over the last 13 and a half months, the U.S. national debt has increased by more than 1.12 trillion dollars. If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now. And most Americans don't realize this, but the U.S. government must borrow far more than a trillion dollars each year. Trillions more in existing debt must be "rolled over" just to keep the game going. For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013. So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation? Our financial system is far more vulnerable than we are being told. We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster. Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay. |
11-22-13 | THEMES |
CORRUPTION & MALFEASANTS
|
SOCIAL UNREST -INEQUALITY & BROKEN SOCIAL CONTRACT | |||
Where QE Cash Ends Up Tells Us Who Benefited 11-19-13 Zero Hedge One can debate whether QE has benefitted Main Street or Wall Street until one is blue in the face, even though five years later, the answer is perfectly clear to all but the staunchest Keynesians and monetarists (and if it isn't, just pay attention to the 3:30 pm S&P ramp every day). One thing, however, that is undisputed is what the market itself says about where the QE money ends up when it is being spent by its recipients. And that story is so simple even a Keynesian would get it. Stated briefly, luxury retailers such as Tiffany, Coach and LVMH are now up 500% since the Lehman lows, and about 30% above the prior cycle highs. On the other hand, regular retailers such as Macy's, Kohl's and JC Penney are barely up 100% from the crisis lows, and still more than 30% below the last bubble highs. And that, in a nutshell, is precisely how the money from QE has been distributed. Source: JPM
|
11-20-13 | THEMES | SOCIAL UNREST INEQUALITY |
CATALYSTS -FEAR & GREED | |||
GENERAL INTEREST |
|
||
TO TOP | |||
|
Tipping Points Life Cycle - Explained
Click on image to enlarge
TO TOP
![]() |
YOUR SOURCE FOR THE LATEST THINKING & RESEARCH
|
TO TOP