The Latest Action of Teacher’s Unions: Ban Them

This sort of activity is a direct assault on the children they claim to be employed to “teach”:
‘There’s no partisan politics about kids. It’s all about doing what’s right, first and foremost.” So declared then Republican Governor Charlie Crist upon signing the nation’s largest expansion of private K-12 scholarships in 2010. Now Mr. Crist is running to get his job back as a Democrat, and his new union friends are suing to block his tax-credit scholarship program. Mr. Crist now says he wants to stop the expansion.
The new union lawsuit complains that this growth is undercutting the state constitution’s requirement for the “adequate provision” of public education. Their beef is that districts lose $6,944 in state funds for every public-school student who uses a scholarship to attend a private school.

This post was published at Market-Ticker on 2014-09-13.

Bubble Forming With Leveraged Buyouts

U. S. middle market leveraged buyout (LBO) transactions are becoming increasingly frothy. According to the latest data from Lincoln International, risk-return fundamentals in the space are worse than they were in 2007. Here are some disturbing facts about leveraged transactions in U. S. middle markets:
1. Leverage multiples (debt to EBITDA) are higher than at the peak of the bubble in 2007. In particular, leverage through the senior debt (dark blue) is now materially higher.

2. Yields on senior leveraged loans for middle market deals are now significantly lower than in 2007. Investors are not getting paid for taking on riskier loans.

This post was published at FinancialSense on 09/12/2014.

Rates Are Rising, Supporting The Dollar But Bad For Gold

This is an excerpt from the daily newsletter to premium subscribers, which offers daily a detailed market analysis (recommended service). It shows the ongoing inter-market effect of a rising dollar, which proves to be weighing on precious metals prices so far.
I suggested yesterday that a stronger dollar was good for U. S. stocks. A stronger dollar is a vote for the American economy, relative to the rest of the world. It’s also a bet on higher U. S. interest rates – both on a absolute and relative basis. The red line in the first chart shows the two-year Treasury yield rising throughout 2014. The green line shows the U. S. Dollar Index doing the same. The rising red line shows ‘absolute’ gains. ‘Relative’ gains are even more impressive. While the two-year U. S. yield is trading at a three-year high (.58%), the German 2-yield is negative and dropping. The spread between short-term U. S. and German rates is the widest since 2007. That’s supportive to the dollar.

I recently explained that a rising dollar is bearish for gold (and most commodities). So are rising rates (which often determine the direction of the dollar). The following chart shows a very strong inverse correlation between the price of gold and the 2-year Treasury yield. As a rule, falling rates are good for gold. That’s because gold is non-yielding asset. As a result, it thrives when rates are low and falling. That was the case earlier in the last decade, and again after 2007. The plunge in short-term rates during 2007 helped the bull market in gold (that started in 2002) to continue. The bottom in the two-year yield in late 2011 coincided exactly with a peak in gold (see circles). The rise in short-term rates since then (see more clearly on a log scale) has corresponded with falling gold prices. Rising rates should continue to weigh on the precious metal.

This post was published at GoldSilverWorlds on September 13, 2014.


Last week was one of those weeks that drives you to drink. The absence of a boss at work for going on seven months has created uncertainty, disarray, confusion, back stabbing and power plays. By Friday I was fed up. I hate office politics. I attempt to help my superiors make the best decisions for my organization by providing them accurate data and interpreting that data in a way that provides direction and guidance based on facts. When I see hidden agendas, egos, and power plays overwhelming the facts, I begin to question my purpose in an organization. I’ve been down that road before and I don’t like it. The meeting on the following Tuesday was going to be a doozy.
I was happy to escape my office on Friday at 5:30. I was actually looking forward to the horrific Friday night commute. This was the first weekend we haven’t had renters in Wildwood all summer. But, we couldn’t head down until Saturday night because we had a family reunion picnic on Saturday afternoon. We decided to go down for one night of fun at the Shamrock and come home on Sunday afternoon. Little did we know how surreal the next 24 hours would be.

This post was published at The Burning Platform on 12th September 2014.

America’s Poor Have Never Been Deeper In Debt

Ever since the Lehman bankruptcy, one of the main reasons given by the perpetual apologists about why i) the so-called “recovery” has been the worst in US history and ii) the Fed has been “forced” to conduct 6 years of wealth transferring policies, boosting the stock market to all time highs and creating a record wealth split in US society between the super rich and everyone else (one that surpasses even that seen during the roaring 20s) is that the US consumer, scarred by the economic crash, has been rushing to deleverage and dump as much debt as possible.
There are two problems with that story:
First, as we first pointed out in 2012, US households are not deleveraging, they are defaulting, a huge difference which goes to motive and intent, and shows that instead of actively paying down debt households are instead loading up on as much debt as they can, which at some point they simply stop servicing (for a detailed analysis of this disturbing trend, read our series on the student loan bubble). Second, when it comes to the poorest quartile of US society, some 14 million people, it is dead wrong. In fact, as the Fed’s triennial Survey of Consumer Finances, released last week showed, America’s poorest have never been more in debt! As usual, the full story is one of nuances. As Bloomberg reports, as a result of the first point – mass defaults – US household debt has indeed declined on an average basis. Indeed, average debt burden for all families stood at about 105% of pretax income in 2013, down from about 125% in 2010 and the lowest level since the 2001 survey.

This post was published at Zero Hedge on 09/13/2014.

China Industrial Growth Slows, Power Generation Negative 1st Time in 4 Years; Stimulate Now, Crash Later

Cries for more stimulus ring loudly in China because Chinese industrial output slowed to 6.9%. That is a number that any country in the world would be more than pleased with, but China’s target is 7.5%.
Why 7.5%? In fact, why should there be any targets at all? The economy is not a car that can be steered by bureaucrats to perfection.
Nonetheless, Calls Grow for More Stimulus, as China August Factory Growth Slows to Near Six-Year Low.
China’s factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world’s second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.
Industrial output rose 6.9 percent in August from a year earlier – the lowest since 2008 when the economy was buffeted by the global financial crisis – compared with expectations for 8.8 percent and slowing sharply from 9.0 percent in July.
“The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won’t be small,” said Xu Gao, chief economist at Everbright Securities in Beijing.

This post was published at Global Economic Analysis on Saturday, September 13, 2014.

Shameless: BBC Caught Manipulating the Debate on Scottish Independence

21st Century Wire says…
Even in the face of obvious state censorship, the media still adopts the soft language, calling it ‘bias’ instead. Call it bias if you want, but it’s really censorship.
As Scottish Independence draws nearer, the media and propaganda war intensifies. London’s financial elite clearly do not want it, and big media are rallying behind the bankers.
If you ask the BBC how their reporting is on Scottish Independence, they tell you it all fine and that ‘it’s perfectly in keeping with our own guidelines’. Besides, who would dare question the BBC?

TOO SMART FOR THE REST OF US: BBC brain cell Robinson shows how desperate the bankers are and how partial the BBC are (Photo: Ceasefire Mag)
In what was perhaps to most pathetic example of propagandising from the press pit ever caught on tape, the one of BBC’s six-figure career propagandists, Nick Robinson (above), attempted to run point on the independence scare-mongering by somehow theorising how Scotland would lose loads of tax revenue should Royal Bank of Scotland (RBS) move its head offices down to London. This was an LOL moment. Intellectually challenged Nick was immediately put in his place by Alex Salmond as to the rules of corporation tax.

This post was published at 21st Century Wire on SEPTEMBER 13, 2014.

13/9/2014: Ukraine’s economy newsflow: from bad to worse

Some grim stats on Ukrainian economy here: very comprehensive survey, despite some politically loaded statements. Read it for the stats at least. Meanwhile, the prospect of Ukraine dipping into gas deliveries destined for Europe is looming as Naftogaz debt continues to rise: and as winter draws closer and closer. The fabled ‘reversed flows’ from Eastern Europe are not materialising (predictably) and reserves are bound to be running out faster as coal production is all but shut. Per Vice PM Volodymyr Hroisman, ukraine is facing a shortfall of some 5 million tonnes of coal by the end of 2014 and gas shortages are forecast at 5 billion cubic meters. As the result, Ukraine is now forced to buy coal abroad, with one recent agreement for shipments of 1 million tonnes of coal signed with South Africa. Electricity exports from Ukraine are suffering too, primarily as domestic production falls and demand rises. In January-August 2014, electricity exports are down 6% y/yNational Bank of Ukraine governor, Valeria Hontareva, has been reduced to talking up the markets by delivering promises that the Government will not default on its bonds and Naftogaz bonds. She had to admit this week that hryvna devaluation has now hit 60% y/y (by other calculations, depending on the currency basket chosen it is just above 40%) and inflation is running at 90%. Recall that on September 2, the IMF assessment of the economy which reflected the updates to risks and latest forecasts. Revised programme forecasts now see real GDP shrinking 6.5% y/y in 2014, but growing by 1% in 2015 and 4% in 2016. Hontareva said this week the GDP can fall by 9% this year alone. End of year CPI is expected to come in at 19% in 2014 (which has now been exceeded by a massive 71 percentage points, based on Hontareva statement) and 9% in 2015 before declining to 6.9% in 2016. Hryvna devaluation vis-a-vis the USD was expected to run around 50.6% y/y which is already too conservative compared to the reality, and by another 6.4% in 2015 falling to a devaluation of just 0.8% in 2016. Needless to say, Hontareva’s statement suggests that the IMF forecasts, published only 10 days before she spoke, are largely imaginary numbers.

This post was published at True Economics on Saturday, September 13, 2014.

Art Cashin: “Things Could Theoretically Turn Into What I Call A Lehman Moment”

Courtesy of Finanz und Wirtschaft, interview by Christoph Gisiger
Wall Street veteran Art Cashin does not fully trust the record levels at the stock market and draws worrisome parallels between the geopolitical tensions over Ukraine and the Cuban missile crisis.
From the assassination of President Kennedy via the stock market crash of 1987 and the Fall of the Berlin Wall through to the burst of the dotcom bubble, the terror attacks of 9/11 and the collapse of Lehman Brothers: Art Cashin has experienced all the major world events of the last half century at the floor of the New York Stock Exchange. Currently, the highly respected Wall Street veteran keeps a close eye on the geopolitical tensions in the Middle East and on the situation in Ukraine which reminds him of the Cuban missile crisis The markets are edgy and nervous, says the Director of Floor Operations for UBS Financial Services while constantly checking the quotation board. Like many traders here, he is somewhat skeptical of the huge stock market rally that started in March 2009. I think it is a question of the extraordinarily low interest rates, he explains.

Mr. Cashin, September is historically the most difficult month of the year for equities. What is your take on September 2014 so far?
It is strange that September still lingers as a particularly weak month. It goes back to when America was more of an agrarian society and we depended on what would happen with the crop cycles. If a cooking factory for example had to buy wheat from the farmers it would send a check out drawn on an account at a city bank and the country bank would then cash it and put the money in the farmer’s account. Before the Federal Reserve was created, there was a wide spread between the time that money was asked for and when it was replaced. For centuries, this caused bank panics around this time of the year, most notably the panic of 1907. You would think that now that we are no longer an agrarian society, those changes would ease up on the financial pressures. But the market has kind of an echo.

This post was published at Zero Hedge on 09/13/2014.

Millennials Get Blamed for Sagging Home Sales in California

This must be part of the explanation why home sales in the expensive parts of California, which is where most people live, are collapsing: according to a Harris Poll on behalf of electronic broker Redfin, 92% of millennials who don’t already own a home do not plan on buying one in the future. Ever.
These people, now between 25 and 34, are in their peak home-buying age. They’re the much sought-after first-time buyers. They’re the foundation of the market. But not this generation. Homeownership rate among them, according to the Commerce Department, already plunged from 41% in 2008 to 36% currently; as opposed to 65% for all Americans [Here’s the Chart that Shows Why the Housing Market Is Sick].
These folks are not ‘pent-up demand’ accumulating on the sidelines, as the wishful thinkers have proclaimed.
‘Millennials who flock straight from college to San Francisco and other expensive cities are making a choice to spend their income on quadruple-digit rents and eight-dollar gourmet hot dogs from trendy food trucks,’ explained Redfin San Francisco agent Mark Colwell. ‘This means they’re not saving for a down payment, further removing them from the housing market.’
So Redfin checked Census data to find the 20 Zip codes in the country with the highest population of educated millennials. Median household income in these neighborhoods is 50% higher than in all ZIP codes. Median home prices are on average $255,000 higher as well. And the average down payment for homes in these neighborhoods is $80,000.

This post was published at Wolf Street by Wolf Richter ‘ September 13, 2014.

Meet The Bubblebusters: Federal Reserve Launches A Committee To “Avoid Asset Bubbles”

Just when we thought that the Fed is pulling an Obama and has “no strategy” to deal with what not some fringe blog but Deutsche Bank itself proclaimed was the bubble to end, or rather extend, all bubbles, when it said that “the bubble probably needs to continue in order to sustain the current global financial system”they surprise us once again when they report that, drumroll, the Fed has formed a committee led by the former head of the Bank of Israel – best known for using de novo created fiat money to buy AAPL stock as part of “prudent monetary policy” – Vice Chairman Stanley Fischer, to monitor financial stability, which according to Bloomberg is “reinforcing the Fed’s efforts to avoid the emergence of asset-price bubbles.”
Because contrary to what even five-year-olds know by now, the Fed is supposedly not promoting theemergence of bubbles but is actually “avoiding” them. No, really.

From Bloomberg on the Fed’s committee for the prevention of asset bubbles:
Joining Fischer on the Committee on Financial Stability are Governors Daniel Tarullo and Lael Brainard, according to the central bank’s latest Board Committee list. Fed officials want to ensure that six years of near-zero interest rates don’t lead to a repeat of the excessive risk-taking that fanned the U. S. housing boom and subsequent financial crisis.

This post was published at Zero Hedge on 09/13/2014.

Chinese Growth Slows Most Since Lehman; Capex Worst Since 2001; Electric Output Tumbles To Negative

While China may have mastered the art of goalseeking GDP, always coming within 0.1% of the consensus estimate, usually to the upside, even if the bogey has seen dramatic declines in the past few years, dropping from double digit annualized growth to just 7.5% currently and the projections hockey stick long gone…

… it may need to expand its goalseek template to include the other far more important measure of Chinese economic activity, such as Industrial production, retail sales, fixed investment, and even more importantly – such key output indicators as Cement, Steel and Electricity, because based on numbers released overnight, the Q2 Chinese recovery is now history (as the credit impulse of the most recent PBOC generosity has faded, something we have discussed in the past), and the economy has ground to the biggest crawl it has experienced since the Lehman crash.
What’s worse, and what we predicted would happen when we observed the collapse in Chinese commodity prices ten days ago, capex, i.e. fixed investment, grew at the slowest pace in the 21st century: the number of 16.5% was the lowest since 2001, and suggests that the commodity deflation problem is only going to get worse from here.

This post was published at Zero Hedge on 09/13/2014.

Weekly Gold Trend Analysis: Dollar Rises Against Gold as Sellers See Fed Hikes

The dollar surely weakened against gold these past few weeks because of political and military tensions in the Middle East and Ukraine. But this week, the dollar strengthened as “peace broke out.” This weighed against gold as did continued happy talk about the US economy; the prospect of climbing interest rates pushed the dollar up against gold this week.
It was a Fed white paper that did the most damage. Released by the San Francisco Fed, it suggested that even the most dovish Fed officials were less accommodative than the market seemed to think. More on this below.
This Week’s Monetary and Industrial Trends
Once again, US economic “happy talk” has created a dollar updraft – and that means that the gold price against the dollar moved down. The US is said to be in recovery with the various collateral impacts that presents for stocks, interest rates and, of course, the gold/dollar price ratio.
In fact, while military jitters diminished, the market found a new stick with which to beat up gold against the greenback. Janet Yellen, et. al, it is said, will have to raise rates sooner rather than later given an uptick in price inflation and economic animal spirits.
According to a Kitco News article, “U. S. Dollar, Interest Rate Expectations Short-Term Drivers,” economist Caroline Bain predicts that these factors will eventually lose some of their persuasive power, though this past week they seemed adequate to the task.
Bain’s firm, Capital Economics, expects the U. S. central bank to raise rates in March 2015, a little more than a half-year from now. Where will the dollar end up? According to the report, “[the firm is] expecting a gradual rise in the Federal Funds Rate with a peak at 2.75% to 3.00% by 2016.”

This post was published at The Daily Bell on September 13, 2014.

What’s Next for the Dollar and Gold?

One reason markets tend to get a little nervous in September is that it’s time for investors to ponder about their asset allocation for the remainder of the year and beyond. With the markets at or near record highs and the US dollar on a roll, what could possibly go wrong? Let’s look at what’s next for the dollar, gold, and currencies.
A couple of highlights:
Equity markets are at or near record highs; Measures of complacency are near record levels (for example, the VIX index, a measure of implied stock market volatility, is near historical lows). 10 Year U. S. Treasuries are yielding around 2.4%, near record lows. The theory is that with the U. S. pulling ahead, the greenback must win. A couple of caveats to this theory:
The U. S. recovery might not be as healthy as it appears: the housing market remains vulnerable; many retailers have challenges; inventory stuffing might be happening at some tech firms; and how can the U. S. recover when Europe and parts of emerging markets are slowing down? U. S. real interest rates are increasingly more negative than Eurozone real interest rates. With the Fed all but promising to be late in raising rates, odds are that the differential will increase. In this context, the notion of an exit appears absurd. There is no historical correlation between a rising interest rate environment and a stronger dollar. That’s because U. S. Treasuries might lose in value as rates rise, providing a disincentive for foreigners to hold the greenback. In our analysis, the Fed’s actions have made risky assets appear, well, less risky, causing everything from stock prices to junk bonds to be more expensive. This is referred to as a compression of risk premia. We go as far as arguing that our recovery is based on asset price inflation. As such, should the Fed truly pursue an ‘exit’, risk premia might expand once again, putting not only asset prices, but the entire recovery at risk. As a result, we have warned investors about a potential crash.

This post was published at Silver Bear Cafe on September 12, 2014.

Scotland: ‘We’re Bought and Sold for English Gold’

‘Ach, the Sassenachs (English) be greet’in and gurn’in (moaning, groaning, wailing) most mightily.’
Every so often, the Scots like to rise up and give the Sassenachs a big scare. Next week, they are threatening to break their union with England and Wales which has been in effect since 1707. The United Kingdom may be no more.
Good for those rambunctious Scots! If Scotland goes independent, Britain will be left a shadow of its former shrunken self, deprived of oil, imperial pretensions, and much of its arrogance. Egad, the hated French will be stronger than England.
The British used to specialize in breaking up countries: Burma, China, India, South Africa, Nigeria, Sudan, Quebec, the Ottoman Empire, Iran, and many others.
If Scots decamp from the United Kingdom, many of these nations will savor sweet revenge. The Irish, who suffered centuries under the boot of British domination, will finally have their revenge.

This post was published at Lew Rockwell on September 13, 2014.

Full Frontal Inflation

By now it’s an article of faith within the sound money community that most major countries have borrowed so much that they’re left with only two options: default on their debt through mass-bankruptcy and a new Great Depression, or inflate it away through stepped-up currency creation.
This is an investment thesis, since a given country’s choice will determine which asset classes rise and fall.
But it’s also a criticism of the people and policies that put us in this box. The presidents, prime ministers, senators, central bank heads and investment bankers who presided over the global economy of the past 30 years screwed up monumentally, leaving today’s savers, entrepreneurs and workers to clean up their mess.
Because acknowledging this stark choice between inflation and Depression is such an admission of failure, it isn’t discussed in these terms on the official side of the debate. There, the tone is more measured and the promise is that the next tweak will more-or-less painlessly return the system to a stable equilibrium of steady growth, full employment and incumbent electoral success.

This post was published at DollarCollapse on September 10, 2014.

PM End of Week Market Commentary – 9/12/2014

On Friday gold dropped -9.60 to 1231.50 on moderately heavy volume, while silver was down -0.09 on moderate volume. After breaking down early in asia, silver rebounded and traded sideways closing down only modestly. Gold just sold off all day long, closing near the low.
On Friday mining shares dropped again, with GDX off -1.61% on moderately heavy volume, while GDXJ was down -2.60% also on moderately heavy volume. GDXJ seems to be doing somewhat better than GDX this week, and miners overall seem to be doing better than gold – minus the one bad day on Monday.
For the week gold was down -37.80 [-2.98%], silver dropped -0.60 [-3.12%], GDX down -4.75%, and GDXJ off -4.61%. The gold/silver ratio was up a very modest 0.10 to 66.14. Gold, silver, and the senior miners have all broken their various support levels and are more or less in free fall. The only hint of good news comes from the junior miners, which have been tracking sideways over the past four days rather than simply plummeting.
Gold breaking support at 1240 was a big deal from a chart perspective. An uptrend is characterized by a sequence of higher highs, and higher lows. Once that “higher low” is broken (1240 for gold), the uptrend is over. This will result in more selling pressure for gold. At least according to charting rules, gold is now trading in a range – and looking at the chart, the top part of the range is steadily declining…which forms a descending triangle, which are typically bearish and often result in a break lower.

This post was published at PeakProsperity on Sat, Sep 13, 2014 –.

“Yes” Makes 100% Perfect Sense for Scotland; Too Close to Call; Strange Bedfellows

Scotland Vote Too Close to Call
Here’s some good news for those rooting for Scottish independence:
In spite of a massive fearmongering campaign by both Labour and Tories in the UK, Scots Independence Race Tightens Six Days Before Ballot.
Scotland’s nationalists drew closer to the Better Together campaign in the latest poll on independence before the referendum, making the run-in to the Sept. 18 vote too close to call.
The poll of 1,000 people for the Guardian newspaper yesterday put support for ‘yes’ on 49 percent and ‘no’ on 51 percent after excluding undecided voters. It is the fourth poll in a week to put the ‘yes’ side within the 3 percent error margin of victory. Only one of those has had the pro-independence side ahead.

This post was published at Global Economic Analysis on Saturday, September 13, 2014.