Setting The Stage For The Next Recession

After two years of insane money printing designed to rescue its failing economy, Japan has now been rewarded with… another recession.
So what went wrong you ask? The same thing that always goes wrong when a central bank resorts to money printing to rescue an economy instead of allowing a cleansing period and a return to real productive growth. All Japan accomplished with its massive QE program was to spike inflation.
As I have pointed out many times in the past, any time the price of energy spikes 80-100% within a short period of time it will almost always cause a recession. As you can see on the chart below when Japan began their foolish money printing campaign it spiked the price of oil 83% as priced in yen. Add to that the increase in sales tax and ultimately this was just too much for the Japanese economy to withstand, and it has now turned back down into another recession.

This post was published at Gold-Eagle on November 23, 2014.

Insure Stock Portfolio For $1 Per Day

It’s difficult to predict the future; some might say it’s impossible. The stock market, as with any process that involves predicting the future, is, as one might expect, very unpredictable. But unlike natural processes that are difficult to predict, for example predicting where and when a storm might strike, the stock market’s unpredictability is intentional.
Whereas a storm may be unpredictable, the inability to forecast its path with 100% accuracy is a result only of a lack of data; the more data – the more accurate the prediction. That’s because, presumably, nobody is steering the storm. If some force outside nature, perhaps some form of consciousness, were to steer a storm, it would not matter how much environmental data was collected, it would not be possible to predict its path without also being tuned to the consciousness controlling its path.
Accordingly, it is not possible to predict stock prices with 100% accuracy without understanding the consciousness controlling those prices. Moreover, it is downright impossible to collect enough data to understand the collective consciousness.
Predicting the Future
There will always be unknown variables that push folks to take trades. Your reasons for taking a trade may be quite different than mine, even if we both happen to buy the same stock at the same moment in time. Furthermore, it is possible for you to earn a profit while I take a loss, on the same stock, purchased at the same moment in time. The end result of each trade depends on how long of a time frame each of our trades encompasses.

This post was published at ZenTrader on November, 23, 2014.

Wrong Three Ways: Europe Not at Risk of Full-Blown Deflation Says ECB Vice President

Statements from various high-ranking central bank officials prove they are totally clueless.
For example, please consider an announcement today by European Central Bank (ECB) Vice President Vitor Constancio: Europe not at risk of full-blown deflation.
During a debate in central Italy, Constancio said he did not think “that in Europe there is the risk of falling into full deflation” because nominal salaries would have to fall in all member countries “and this cannot happen”.
Cannot Happen?!
One really has to wonder about what is in these central banker’s heads. Constancio is wrong at least three ways.
Wrong Three Ways
Even if nominal wages and salaries rise, consumers can choose to deleverage, paying down debt, rather than spend. It is not impossible for aggregate wages and salaries to drop in all or nearly all member countries, and indeed I expect just that when the European recession hits Germany. Advantage of inflation grossly misstated.

This post was published at Global Economic Analysis on Sunday, November 23, 2014.

The World Has Entered the Terminal Phase of Central Banking

This is a syndicated repost courtesy of Money Morning. To view original, click here.
Stocks traded to new record highs last week on the back of new central bank initiatives to prop up struggling economies around the world. The People’s Bank of China announced an unexpected cut in its benchmark lending and deposit rates for the first time since 2012. Hours later, ECB President Mario Draghi made another promise that his central bank would take new steps to bolster European growth and the ECB announced that it had begun buying back asset-backed securities.
Coming two weeks after the Bank of Japan and Japan’s large public pension fund announced manic interventions into financial markets to support that country’s failing economy, investors have dismissed any concerns that the end of QE in the U. S. will deny them the liquidity they have feasted on for the last few years. Since the October flash sell-off, markets have gone parabolic and totally disconnected from the struggling economies that are supposed to support them.
The world has things backwards and when it straightens itself out, there will be blood…
One Area of Market Weakness
Last week, the Dow Jones Industrial Average rose by 175 points or 1% to close at a record 17,810.06 while the S&P 500 jumped 24 points or 1.2% to a record close of 2,063.50. Both indices are up roughly 13% from their October 15 low in a mere five weeks. The Nasdaq Composite Index added 24 points or 0.5% to end the week at 4712.97 while the small cap Russell 2000 finished unchanged at 1172.52. The Russell has outperformed larger stocks since mid-October. In the bond market, rates remain low with the yield on the benchmark 10-year Treasury ending the week at 2.32%.

This post was published at Wall Street Examiner on November 23, 2014.

When the Rustlers Wear Badges

Sweeney Gillette, a very successful cattle trader from Ontario, Oregon, had barely finished a pleasant chat with his ex-wife when his phone rang. In an agitated voice, Gillette’s attorney reported that he had just been contacted by a Malheur County deputy District Attorney who accused the rancher of ‘unlawfully interfering with a witness’ – namely, his ex-wife.
Since the attorney called literally seconds after Gillette had hung up, the call from the deputy DA must have come in the middle of the conversation with his ex-wife, who later insisted that she hadn’t told anyone about the phone call.
Both Sweeney and his former wife were under surveillance by the Malheur County Sheriff’s Office, most likely through a ‘trap and trace’ system. This form of electronic eavesdropping records what the NSA calls ‘metadata’ – the telephone numbers and Internet addresses of people who communicate with the subject of a warrant.
Sweeney’s ex-wife was not the focus of an investigation, nor was she a witness. Her ex-husband, however, had been targeted by the Malheur County Sheriff’s Office for a campaign of harassment and defamation that would eventually destroy his business and drive his family out of the state.
Although he was never charged with a crime, Gillette suffered millions of dollars in losses – and the lawsuit he has filed against Malheur County may eventually require tax victims residing therein to pay millions of dollars to indemnify the department’s misconduct.
Multi-state campaign of harassment
In April 2011, Gillette owned 3,500 cattle, 130 acres of land, and a feedlot. The business Gillette had built from the ground up after dropping out of school at age 14 was thriving: In the previous year, he had traded more than seven million dollars’ worth of cattle. He had loyal customers throughout the Intermountain West, and a $2 million line of credit. The family was well-regarded in their community, and the business was well-respected within a cliquish and gossip-prone industry.
This happy state of affairs changed abruptly after Sweeney Gillette was contacted by a federal investigator named Kirk Miller, who claimed that there were paperwork irregularities regarding a herd of 600 cattle the family was running on leased ranch in Nevada called Soldier Meadows. Sweeney was given notice that his BLM grazing permit had been canceled, and that he had thirty days to assemble the necessary paperwork, and have the cattle inspected and identified by the appropriate authorities.

This post was published at Lew Rockwell on November 22, 2014.

The Best And Worst Performing Assets During Thanksgiving Week

While technicals remain largely meaningless in the global centrally-planned “USSR market” (as penned by Russell Napier, who asked “Which World Has No Volume, No Volatility And Rising Prices?”, his answer: the USSR), pattern-seeking carbon-based traders still find refuge in the comfort provided by technical analysis. So for all those who believe past performance is indicative of future results, here according to BofA’s MacNeil Curry is how various asset classes perform during Thanksgiving week compared to all other weeks during the year.
From BofA:

This post was published at Zero Hedge on 11/23/2014.

Days Of Extreme Volatility And Market Breadth

Publishing Note: I’m taking a break for the holidays, but I’ll be back after the New Year comes in. However, if I see something exciting to write about, I may send something your way before 2015. Until then, I wish you a Happy Thanksgivings for next week, and a Happy Hanukkah or Merry Christmas a month from now. It’s a good time of year to remember of all the blessings God has sent our way, and be thankful for them.
2014 has been a very good year for the ‘policy makers.’ Seeing the Dow Jones up 8.32% on the year tells us that, but more importantly we can see their success in enforcing ‘stability’ in the economy by the lack of days of extreme volatility and breadth in the stock market. Let’s look at days of extreme volatility first; these are defined as days when the Dow Jones’ daily closing price is up or down 2% or more from the previous day’s close. Such days are rare market events, except when Mr Bear is prowling Wall Street feasting on overpriced financial garbage, of which there is plenty lying about as we approach the end of 2014.
Here’s a chart showing every Dow Jones 2% day since January 1900. Over the past 114 years there have been 31,176 trading days at the NYSE, yet only 1,794 have seen a Dow Jones move of 2% or more from the previous day’s close. Although days of extreme volatility are rare market events they frequently occur during bear markets, making the clusters of 2% days seen below RED FLAGS of serious market declines. Note also that all big double-digit positive daily advances since January 1900 have been exclusively bear market events. Why might that be? Simple; when Mr Bear is hard at work he makes life miserable for both longs and shorts alike. Can you imagine the horror of holding a profitable short position one day and then seeing the Dow Jones gain over 10% the next? And those gains were among quality blue-chip stocks; thegarbage stocks the shorts had been ganging up on were up even more on the day.

There were only a hand full of these hyper-extreme up days during the Great-Depression. We didn’t see another until half a century later in October 1987 when Wall Street’s computers went on a selling spree, giving Alan Greenspan his first opportunity to show the world what a genius like himself could do for market valuations by ‘injecting liquidity’ into the financial markets. The next positive 10% daily move in the Dow Jones didn’t occur until the mortgage crisis more than thirty years later.
Next we look at the Dow Jones’ 200 Day Count; or the number of Dow Jones 2% days (days of extreme volatility) in a running 200 day sample from January 1900 to today. The two deepest bear market bottoms are easily identifiable in the chart: the Great Depression bear market bottom of 1932 (89% decline) with 102 days of extreme volatility in a 200 day sample, and the Credit Crisis bear market (54% decline) with 83 days of extreme volatility in a 200 day sample. You might think that the #3 Dow Jones bear market is identified with the 1938 peak, but that is actually the #4 Dow Jones bear market bottom (49% decline). The third deepest Dow Jones bear market occurred in April 1942 (52% decline) with only 6 days of extreme volatility in its 200 day count.

This post was published at Gold-Eagle on November 23, 2014.

Gold Investors Weekly Review – November 21st

In his weekly market review, Frank Holmes of the summarizes this week’s strengths, weaknesses, opportunities and threats in the gold market for gold investors. Gold closed the week at $1,200.29 up $11.54 per ounce (0.97%). Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 4.24%. The U. S. Trade-Weighted Dollar Index gained 0.87% for the week.
Gold Market Strengths
Gold reversed losses after China cut benchmark interest rates for the first time since July 2012. Additionally, Standard Chartered raised its forecast for 2015 average gold prices to $1,245 per ounce, up from $1,160 saying that many of the factors pressuring gold will be neutralized. Standard expects dollar bullishness to fade and worries about deflation to subside.
The U. S. Mint has sold 2,570,500 ounces of silver coins so far in November. If the pace continues, total sales for the month would be around 4,284,167, up 257 percent from a year earlier.
The Dutch central bank shipped 122 tons of gold from safekeeping in New York back to Amsterdam, increasing its home reserves to 31 percent from 11 percent previously. The bank said it is joining other central banks that are keeping a larger share of their gold supply in their own country, contributing to a more balanced division of the gold reserves. This move may also have a positive effect on public confidence.
Gold Market Weaknesses
Hedge funds extended their fastest exit from gold this year, cutting bullish gold wagers for a third week. Holdings tumbled 49 percent over three weeks, the most since December. Additionally, assets in exchange-traded products backed by the metal dropped to the lowest since 2009, as the World Gold Council said third-quarter global demand was the weakest in almost five years.
The U. S. Geological Survey noted on Monday that gold production by U. S. mines in August had decreased by 11 percent from a year earlier.

This post was published at GoldSilverWorlds on November 23, 2014.

Treebeard: Becoming The Change We Wish To See

The following video was published by ChrisMartensondotcom on Nov 23, 2014
Exploring the development of inner resilience
This week’s podcast delves into matters of the inner self.
Here at Peak Prosperity, we follow a lot of the problems and challenges of the world around us and explore what can be done in response to them. And in seeking solutions, we have to remind ourselves that if we want the world to be different in some way, the only way to begin changing it with 100% certainty is by changing ourselves. In the end, we are responsible for how we perceive and relate to what’s happening around us, and true change begins with taking ownership of what our reality is, and what we want it to be.

Fear Of “Surge In Debt Defaults, Business Failures And Job Losses” Means Many More Chinese Rate Cuts

If admitting you have a problem is the first step toward recovery, then China is making progress. The question is progress to what, because the generic answer, “another debt-fueled boom” is no longer applicable. Recall that as we noted here initially in the summer of 2013, the very reason why China finds itself in a reformist quandary is that the traditional method of Chinese “growth” – issuing a little under $4 trillion in aggregate system debt per year – no longer works as the bad debt portion of the Ponzi scheme is rising at a faster pace than the total notional of debt itself.
Which means the PBOC, which cut rates for the first time in two years on Friday, will have its work cut out for it. And in the worst tradition of “developed world” banks, Beijing will now have no choice but to double down on the very same bad policies that got it into its current unstable equilibrium, and proceeds with a full-blown policy flip-flop, leading to a full easing cycle that reignites the bad-debt surge once more.
And sure enough, today Reuters reports citing “unnamed sources involved in policy-making” (supposedly different sources than the unnamed sources Reuters uses to float trial balloons used by the ECB and the BOJ), that “China’s leadership and central bank are ready to cut interest rates again and also loosen lending restrictions” due to concerns deflation “could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making.” In other words, China has once again looked into the abyss once… and decided to dig a little more.
The story is well-known: “Economic growth has slowed to 7.3 percent in the third quarter and policymakers feared it was on the verge of dipping below 7 percent – a rate not seen since the global financial crisis. Producer prices, charged at the factory gate, have been falling for almost three years, piling pressure on manufacturers, and consumer inflation is also weak.”
Of course, in modern economics, deflation simply means deleveraging, which as we showed last weekend, is precisely what is happening to China’s shadow banking sector every month in the prior quarter.

This post was published at Zero Hedge on 11/23/2014.

Gold, Silver, and Blue Dollars

‘Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange.
Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society’s divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.’
– Alan Greenspan, former Chairman of the Federal Reserve
The political-financial elite will never formally acknowledge gold as a currency. Formally, it is more likely that standard drawing rights, via the IMF’s balance, will dovetail with the U. S. dollar’s drift away from reserve status.
The irony of course, is that the political-financial elite of the West is basically synonymous with the IMF – especially the United States. But formal admission or official re-institution will never occur.

This post was published at Silver-Coin-Investor on Nov 23, 2014.

Guest Post: Why Monetizing Debt Could End In Revolutions

Much has been made of the decision by the Japanese government to inject another $700 billion into their ailing economy. While some may see this as an earnest attempt to save Japan from further stagnation and deflation, even some of the mainstream media (e.g. Bloomberg) are questioning the wisdom of this reckless act.
Over the last few decades, since the crash of 1989, Japan has injected billions into its banks and stock-market to help its economy but all of it has been a miserable failure. America has, via the Federal Reserve, increased its national debt to formerly unthinkable numbers with almost no effect on its ailing economy. Most of Europe has huge public debt as a result of bank bailouts, but still suffers from stagnating or shrinking economies.
In fact, any privately owned central bank that has undertaken monetization policies (creating more public debt) has failed to improve their nation’s economy and merely created a transfer of wealth from the general public to corporate hands.
Of course, government owned banks such as in China and Russia are and do take somewhat different actions given that they are owned by the public (state owned) and not private individuals or corporate entities. Therein lies the crux of the matter – private ownership means private interests, therefore the needs of the country and the populace are of no concern at all.

This post was published at Zero Hedge on 11/23/2014.

Grand Jury Decision Unlikely This Weekend As Private Security Move “Guns & Gold” Out Of Ferguson

Sporadic confrontations and violence between protesters and police continued to occur overnight in Ferguson as multiple news agencies report grand jury considering whether to indict the Ferguson police officer who shot and killed teenager Michael Brown is unlikely to meet and render a decision this weekend. The fear, as we have previously noted, is a major uprising as one sign protested, “if the killer cop walks, AmeriKKKa Halts,” and as Fox reports, Brown family attorney is managing expectations, “99% of the time the police officer is not held accountable for killing a young black boy,” Crump said. “The police officer gets all the consideration.” There is, however, another potential reason for delaying the decision’s reporting, as VICE reports, business owners in the St. Louis, Missouri area have hired private military contractors to transport guns and gold, fearing their shops will be targeted by looters if a grand jury does not indict.

As Fox reports, a grand jury decision this weekend is unlikely,
The grand jury considering whether to indict the Ferguson police officer who shot and killed teenager Michael Brown is unlikely to meet and render a decision this weekend, sources told Fox News on Saturday.
Those same sources say it is likely the grand jury will wait until Monday to reconvene.
The 12-member grand jury has been considering whether charges are warranted against Officer Darren Wilson, who shot and killed the 18-year-old Brown on Aug. 9 during a confrontation on a street in Ferguson. Wilson is white and Brown, who was unarmed, is black.

This post was published at Zero Hedge on 11/23/2014.

Russian economy: Capital Outflows Trends

Russian Capital Outflows have been pretty extreme so far in 2014 – totalling USD85.3 billion in the first nine months of 2014, up on 44.1 billion net outflows in the same period of 2013, USD45.8 billion in 2012 and USD46.9 billion in the same period 2011. At annualised rate, current outflows are running at around USD114 billion, which is the worst year after 2008 outflows of USD133.6 billion.
More than half of these outflows fell on Q1 2014 (USD48.6 billion) with *only* USD36.7 billion in Q2 and Q3. In fact the rate of outflows in Q3 was below the average for 2008-present period (USD18.7 billion per quarter) and over Q2 and Q3 average rate of outflow was below average as well. Overall, Net Capital Outflows for Q1-Q3 2014 exceeded average rate of outflows by USD29.3 billion.
Looking at the composition of outflows, USD16.1 billion of net outflows over the first nine months of 2014 came from the Banking sector – which is worse than the same period 2013 (USD10.9 billion) and 2012 (inflows of USD9.6 billion), but better than the same period of 2011 (outflows of USD17.3 billion). 2008-present quarterly average Banking sector net outflows stand at USD3.72 billion, which suggests that current nine months cumulative outflows exceed average by about USD4.9 billion.

This post was published at True Economics on November 23, 2014.