13/10/2014: Germany: Too Old to Read Paul Krugman or Rescue Europe

You want to know WHY Germany ain’t ‘saving Europe’ in a fashion favoured by Paul Krugman? Read this:

Key point, of course, is demographics. Germany already experiencing shrinking working age population pool. And this process is only going to accelerate.
Here are 2009 projections for worker/retired ratios in economies:

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

Peter Thiel Warns Of “Government Bubble Of Massive Size”

Marc Faber warned last week that central-bank-funded deficits were creating bigger and bigger governments which implicitly reduce the dynamism of the economy and slow growth. Today, it was billionaire venture capitalist Peter Thiel’s turn to make the anchors on business media squirm a little in his unleashed truthiness. Having predicted the current surge in volatility just weeks ago (due to the end of QE), Thiel believes “the thing that is most distorted is the bond market and fixed income, and perhaps less on the equity side,” but, he warned, “we certainly are back on a government bubble of massive size,” and as Faber notes, that means slower growth as Thiel notes, with regard Tech investing “investors always overrate growth.”

This post was published at Zero Hedge on 10/13/2014.

After Central Bank Financial Repression: Bubble Liquidation And Industrial Deflation Come Next

Nearly two decades of central bank financial repression have created huge distortions and imbalances in the world economy. Now they are coming home to roost as the impossibility of ZIRP forever dawns on even our mad money printers. Having created yet another round of ebullient financial bubbles, they are now getting palpably nervous.
Even the lady with the perpetual tan and unfailing call for ‘moar’ monetary and fiscal stimulus, IMF head Christine Lagarde, said something sensible over the weekend:
‘There is too little economic risk-taking, and too much financial risk-taking.’
She got the ‘too much financial risk-taking’ part right, but here’s the thing. The apparatus of state policy – -fiscal borrowing and central bank money printing – -can not cause enterprise to flourish. Free market capitalism is the milieu in which business enterprise, invention, risk-taking and labor productivity thrive best. So, yes, reducing market impairments – such as tax rates on production and capital which are too high or regulations, protectionist laws and subsidies which are too onerous – -is always helpful.
These latter steps are now coming into fashion under the heading ‘structural reform’ and they make sense as far as they go. But central bankers like Draghi and international monetary bureaucrats like Lagarde pushing this agenda fail to recognize that their own policies on the fiscal and monetary side currently dwarf the ill-effects of, for instance, over-zealous EPA regulation in the US or protectionist labor laws in Europe.
In fact, long-standing financial repression and absurdly low interest rates have generated malinvestments and debt burdens that are crushing enterprise and true economic risk-taking throughout the world economy. In the DM (developed market economies), the resulting malady is consumer balance sheets that are bloated with debt; and in the EM (emerging markets) the ill takes the form of vastly bloated industrial capacity and public infrastructure. So if there were ever a case of ‘physician, heal thyself’, this is it.

This post was published at David Stockmans Contra Corner on October 13, 2014.

Rule From The Shadows: The Psychology Of Power

‘Some of the biggest men in the United States, in the field of commerce and manufacture, are afraid of somebody, are afraid of something. They know that there is a power somewhere so organized, so subtle, so watchful, so interlocked, so complete, so pervasive, that they had better not speak above their breath when they speak in condemnation of it.’ -President Woodrow Wilson in his book the ‘The New Freedom’ published in 1913
The quest for power is the primary driving force of history, always has been, always will be. Those who fail to recognize this principle are not spared in the grand chess game, but rather are moved and manipulated by forces that they do not understand.


This post was published at Zero Hedge on 10/13/2014.

The 64-Month Pattern In Stocks And Gold

Years ago when I set out to study huge growth patterns in markets — more commonly known as “bubbles” — I discovered a remarkable timing signature common to every single one of these patterns:
They all last exactly 64 or 65 months.
All the “name-brand” market bubbles in history have lasted 64 or 65 months from initial growth to blow-off top.
This includes the 3 biggest bubbles in modern market history:
The Dow into the 1929 peak The Nikkei into the 1989 peak The Nasdaq 100 into the 2000 peak This also includes more recent bubbles, such as home-builders into 2005, and crude oil into 2007, and for a more recent example, the stock of Priceline (PCLN)…

This post was published at Gold-Eagle on October 13, 2014.

Stunning Images Of The World’s Planned Cities, As Seen From Space

Most planned cities probably aren’t designed with the view from space in mind, but, asWired.com’s Betsy Mason notes, some of them create incredible patterns on the landscape that can only be truly appreciated from above.
Via Wired.com,
Planned cities are laid out all at once and built from scratch. They are designed with a purpose in mind: to optimize traffic flow, or to maximize access to green space or to keep everyone in their proper place. They are born from many different inspirations. Some are a compromise between two cities vying to be their country’s capitol, built in between in neutral territory on previously undeveloped land. Some are built to keep workers near a nuclear power plant or copper mine in the middle of nowhere. Some are intended to be a utopia — with public gardens, promenades, throughways and harmony — to cure the “urban disease” rampant in most ad hoc cities.
These cities, towns and communities can be found all over the world and throughout history, hundreds of years into the past and several decades into the future. Here are some of the best views of planned cities from space.

This post was published at Zero Hedge on 10/13/2014.

Pentagon’s New Space ‘Shuttle Drone’ Has Been in Orbit Since 2012

21st Century Wire says…
The retirement of NASA’s Space Shuttle fleet took place in 2011…
Critics accused the US government of sand-boxing the world’s most innovative and successful space program ever. It turns that Washington’s master plan has been to trade in its Space Shuttle for a replica drone. NASA is no longer in control of this shuttle program, instead the Pentagon is running the show.
That drone is called the X-37B Orbital Test Vehicle, and it landed this week in California after being in low Earth orbit since 2012.
It still remains highly classified – which has only fueled speculation as to the true purpose of this multi-billion dollar ‘space drone’ program. Mainstream space pundits believe that the new ‘Shuttle Drone’ is designed for reconnaissance and for deploying small satellites into any orbit

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

Gravity Returns – The Market Drops Nearly 5% in 3 Days

A month ago, in an analysis titled Defying Gravity: The case for hedging against a market downturn, I wrote about the unsustainable state of the stock market’s high prices.
In it, I noted how the stock market had risen an aberrantly-long time time without a correction, and that it hadn’t tested its 200-daily moving average price even once since 2012:
Today’s markets exist in an Oz-like, fantasy world. For 5 years now, stock and bond prices have risen like Dorothy’s balloon, with hardly a puff of downdraft to spoil the fun.
Everybody likes higher prices, so let’s have them always go up! Forever!
Whether that can indeed happen is a topic of hot debate, though few are yet willing to predict corrections have been permanently banished from the financial markets.
In this article, we investigate the rationale for prudent hedging in light of today’s elevated prices. If, like most investors, your portfolio is positioned long-only (i.e., betting on a continuation of higher prices) and is mostly-to-fully invested in stocks and bonds, read on to learn why having insurance against a market correction is a wise move to consider at this time.
Too Much Of A Good Thing Consider the price performance of the S&P 500 since it bottomed after the 2008 crisis. It has now enjoyed 34 straight months of upward movement without a correction of 10% (there have only been 2 longer correction-free stretches for the index in the past 25 years):

Furthermore, this half decade-long rally has been unusually strong. Since the end of 2012, the S&P has tested its 100-day DMA only 15 times (that’s really infrequent), and traded below is 200-day DMA zero times (that’s shocking).

This post was published at PeakProsperity on October 13, 2014.

WHY IS CRUDE OIL DOWN MORE THAN 20% FROM ITS HIGHS THIS YEAR?

Oversupply from Saudi Arabia? A recession in China that is not being reported yet? Or a mixture of the two and a recession in Europe and Japan?
The price of crude oil is down more than 20 per cent from its high this year. And falling energy prices are taking the stock market down too. Breaking down the moves in oil is Matt Smith of Schneider Electric…

This post was published at Arabian Money on 13 October 2014.

Why Tomorrow It Could Get Even Worse

While today’s market dump was certainly dramatic, it was a function of the scant liquidity in the market (as we warned would be the case first thing) and outsized moves following last week’s mauling, not the result of any fundamental (or not so fundamental) news.
That could change tomorrow, and change for the worse, because as Barclays reminds us, tomorrow is when the European Court of Justice (ECJ) is scheduled to hear testimony on the ECB’s non-existent Outright Monetary Transactions program (OMT). Recall that the OMT is the imaginary (again: non-existent) byproduct of Draghi’s “whatever it takes” speech: a byproduct that was supposed to exist purely in the imaginary realm (as it was merely a verbal bluff, one which was never meant to be actually activated), and never actually take practical shape (hence, why the OMT’s legal term sheet still does not exist, over two years later).
Sadly for Draghi, and the entire Deus Ex theater that managed to send European peripheral bonds from record wides yields to record low, tomorrow it will attain some much dreaded shape.
And while a ruling on the legal questions forwarded by Germany’s Constitutional Court is not expected this year, the hearing and questions posed by EU judges may give some early insights into their views and to what extent they might share the view of the German court that, unless several restrictions are imposed, the OMT should be considered illegal under European law.

This post was published at Zero Hedge on 10/13/2014.

Billionaires Like Bloomberg and Bill Gates Are ‘Buying Gun Control’ in Washington State

WND just reported that Michael Bloomberg isn’t the only billionaire walking around with deep pockets and a rabid anti-gun agenda.
Apparently multiple billionaires have shelled out some eight million dollars on ensuring that Initiative 594 appears on Washington state’s November ballot:
The strategy in Washington relies on big money supplied by a few ultra-rich elites and, if successful, could serve as Bloomberg’s model for tightening the strings on gun owners nationwide.
Initiative 594 would not only require background checks for transactions at gun shows and over the Internet but also person-to-person sales and loaned guns. Even handing a firearm to a friend for a few moments during a hunting trip would trigger the need for a background check if Initiative 594 were to pass, critics say.

This post was published at The Daily Sheeple on October 13th, 2014.

One simple chart to explain the defining problem of our times

London, England
[Editor’s note: Tim Price is a London-based wealth manager and editor ofPrice Value International.] ‘When sorrows come,’ wrote Shakespeare, ‘they come not single spies, but in battalions.’
True. And Jeremy Warner for the Daily Telegraph identifies ten such sorrows in his ‘ten biggest threats to the global economy’:
1) Geopolitical risk;
2) The threat of oil and gas price spikes;
3) A hard landing in China;
4) Normalization of monetary policy in the Anglo-Saxon economies;
5) Euro zone deflation;
6) ‘Secular stagnation’;
7) The size of the debt overhang;
8) Complacent markets;
9) House price bubbles;
10) Ageing populations.
We’ll start with point #7: the size of the debt overhang.
Since this was never addressed in the immediate aftermath of the Global Financial Crisis, it’s hardly a surprise to see the poison of debt continue to drip onto all things financial.
ALL German government paper out to three years, for example, now offers a negative yield. Investors must pay rent to the German government in order to buy its debt.

This post was published at Sovereign Man on October 13, 2014.

This Is What Happens When Someone Is Desperate To Sell $750 Million Of Stocks

At 1532ET today (Columbus Day – with half the market absent), someone – apparently having waited to see if the almost ‘ubiquitous’ 330pm Ramp would occur – decided it was time to dump three-quarters of a billion dollars notional of US equity market exposure in 1 second. The results of this forced liquidation (or utter disregard for fiduciary duty) were as follows…

This post was published at Zero Hedge on 10/13/2014.

PHYSICAL GOLD INVESTMENT: The United States Ranks Worst In The World

Ever since the world suffered a near collapse of its economic and financial system in 2008, investors around the globe have purchased physical gold in increasing volume. However, if you lived in the United States… the opposite is the case.
Not only did Americans purchase less gold, they ranked DEAD LAST on the planet. Americans came in last place due to the wonderful job the FED and U. S. Treasury accomplished by totally bamboozling its citizens into believing the financial crisis was over and everything was now under control.
Of course the opposite is the case, but you wouldn’t know if you visited any of the typical large suburban ‘Restaurant Row’ in the states. It’s standing room only, especially on a Friday night. Why should Americans buy gold when they could drop a $100 bill at the Outback Steakhouse on Friday, $150 for attending a college football game on Saturday and another $250 for a NFL game on Sunday??
Times are good and Americans are spending fiat money hand over fist…. well, that is… until the next major financial crisis hits.

This post was published at SRSrocco Report on October 13, 2014.

LETHAL TAPER

Lethal Taper: The Buffett Valuation Indicator Flashing Red (Are Stocks And Housing Too ‘Frothy’?)
Market Cap to GDP is a long-term valuation indicator that has become popular in recent years, thanks to Warren Buffett, the Oracle of Omaha. Here is a chart of the market cap to nominal GDP, aka the Buffett Valuation Indicator. Note that we are currently in the second highest spike since 1952.

Here is the Buffett Valuation Indicator since 2000 versus the Wilshire 5000 Total Market Full Cap Index. Note that they both peak in 2007, then decline.

This post was published at The Burning Platform on 13th October 2014.

Gold Daily and Silver Weekly Charts – A Little Flight to Safety

Gold caught a little ‘flight to safety’ today as stocks fell out of bed in the last hour of trading.
Silver cannot seem to get out of its own way, but managed to post a little gain in the aftermarket.
As a reminder, this Friday is a stock option expiration, so let’s be on the lookout for the games Wall Street people play.
There was no real economic news in the US for Columbus Day holiday, but we have some news later this week, and as always earnings reports.
I don’t know if it is the November elections effect or what, but the commentary on American television is going from silly to absurd. The Very Serious People in New York and Washington must be living in some alternate universe.
Let’s see what happens when the adults come back to work tomorrow. We will probably see some follow on selling in overseas markets, although it was not quite clear what triggered the big selloff this afternoon. Just skittish, perhaps. And some pre-option expiration hijinks.

This post was published at Jesses Crossroads Cafe on 13 OCTOBER 2014.

Debris from Subprime Auto Loans to Ricochet across Main Street

Profit on subprime is just too juicy to resist.
We called them ‘note lots.’ People with terrible credit could go buy an old beater there. Ideally, it worked like this: you walked in with $500 cash. The dealer showed you a ‘cream puff’ he’d bought for $500. You didn’t like the car, but you’d been turned down everywhere. The dealer made you a ‘great deal’ for $2,000. He’d already recoup his cost. Everything else was profit. You signed a note for $1,500 with 21% APR and drove off with the car.
Three months later, the brakes shot craps. You had them fixed, thereby using up the money for your monthly payment. Five days after the payment was due, the dealer called and asked for it in cash, to be handed to him. You promised. On day seven, he sent the repo man. He’d sell the same car to the next guy under the same conditions. Even if he couldn’t recover the car, he was still ahead. Because there is one ancient truth in the car business: you can make the most money on people with bad credit.
The opportunity was just too good. Soon, reputable new-car dealers got involved, calling it ‘special financing’ before the word ‘subprime’ was born, and some of them got into trouble over it, but what the heck [for the inside scoop, read my book, TESTOSTERONE PIT, an edgy, raunchy, and funny novel about car salesmen, their customers, managers, and the shenanigans at a large Ford dealership; it’s so cheap it’s almost free].
Over the years, the process moved up-market, became more sophisticated. Now deadbeats can even buy new cars, and the biggest banks are involved, and everyone is happy: manufactures because it moves the iron; dealers because they’re making a ton; and lenders, oh my!
The interest is juicy, if not usurious. They get to package these loans into asset-backed securities and sell them to mutual funds in your portfolio, and everyone is extracting money along the way. Finance companies pop up to focus on auto subprime because banks can be a little squeamish when it comes to the dirty underbelly of the business. However, banks have no problem lending to these finance companies to fund their subprime loans, and the money flows, and it all adds to retail sales, manufacturing, industrial production, a million other closely watched metrics, and GDP. And everyone is happy.
Well, not everyone.

This post was published at Wolf Street on October 13, 2014.