China Manufacturing PMI Drops To 8-Month Lows, Teeters On Brink Of Contraction

From exuberant credit-fueled cycle highs in July, China’s official Manufacturing PMI has done nothing but drop as the hangover-effect from the credit-impulse weighs once again on the now commodity-collateral crushed nation. At 50.3 (missing expectations of 50.5 for the 2nd month in a row), this is the lowest print since March. All 5 components dropped led by notable weakness is outout and new orders (new export orders biggest MoM drop in 17 months) with medium- and small-enterprises heading deeper into contraction (at 48.4 and 47.6 respectively) as the Steel industry PMI craters to 43.3. Japan’s PMI dropped marginally to 52 and then HSBC’s China Manufacturing confirmed the government data and flash reading with a 50 print – the lowest since May as New Export Orders growth slowed for the 2nd month.

This post was published at Zero Hedge on 11/30/2014.

“Why Anyone Believes Printing Money Will Leave Us Better Off Is Beyond Me”

From a tactical point of view, Saxobank’s CIO Steen Jakobsen lives in a very simple world:

”A great deal of intelligence can be invested in ignorance when the need for illusion is deep’ – Saul Bellow Just back from four cruel weeks of travelling: Bucharest, London, Sydney, Melbourne, Lisboa, Porto, Madrid, and Zrich. Housing bubbles everywhere to be seen, and all denied by local policymakers and economists. The big selloff in 2015 will come from housing and housing-related investments as the marginal cost of capital rises through regulation and through ‘margin calls’ on banks as their profit-to-GDP ratios grow too high for the economy to function properly. The dividend society is here and the true manifestation of Japanisation is not a future event but a thing we are living in right now… Core trading view Ten-year bond yields (US) will continue lower into the second quarter of 2015. I see acceleration to the downside, mainly in the US where 10-year yields could hit 2.00% and bottom out at 1.5% by Q2 as GDP comes off (relative to ‘lift off’ consensus). European factors: Lower than anticipated growth in Germany (China rebalancing, lower US current account deficit and EZ overall); the impact of the Russian crisis is only beginning to impact the real economy, and of course there is the deflation (which the European Central Bank promised us would never happen…). US factors: Energy sector moving towards default and closing down capacity, subtracting 0.3-0.5% from GDP, plus a lackluster housing market (despite record low mortgage rates), plus contraction in monetary aggregate…

This post was published at Zero Hedge on 11/30/2014.

Crude Carnage Goes Contagious As Brevan Howard Liquidates Underperforming Commodity Fund

The entire commodity complex is seeing major contagion-like price declines in early trading. WTI Crude is back below $65 for the first time since May 2010 – now down 16% since the initial leaks of OPEC’s decision last Wednesday. Gold and Silver are getting whacked and copper has plunged below 300 – back at its lowest since June 2010. The news over the weekend that Brevan Howard is liquidating its $630 million commodity hedge fund following recent poor performance is also likely not helping as what looked like late-Friday margin call liquidations are extending notably this evening.

This post was published at Zero Hedge on 11/30/2014.

Instability, Here We Come

Last week saw the global financial system tip from delusion – where it had happily drifted for several years – into chaos. Consider the following more-or-less randomly chosen data points:
French unemployment hits record high
Italian unemployment hits record high
Oil’s price falls by $10.36/bbl, or 13.5%, in a single day, to its lowest price since 2010.
Copper falls by 6% to $2.86/lb, 25% below its 2013 high.
European bond yields fall to record lows. Even Italy, with government debt exceeding 130% of GDP, can now borrow for around 2%. Japan, meanwhile, issues bonds with negative interest rates.

This post was published at DollarCollapse on November 30, 2014.

The kids aren’t alright: A record percentage of young adults live with older Americans. The trend continues to renting.

Higher home values for the sake of higher prices is not necessarily a good thing if future generations of Americans are being priced out of the market. There seems to be this movement that simply ignores the glaring plight of many Americans regarding stagnant incomes and the reality that we have gained 7 million renting households while facing a similar number in completed foreclosures since the Great Recession hit. The system in terms of organic supply and demand was artificially stunted as foreclosures lagged and banks auctioned off swaths of properties to large investors. With this trend backing off we are now left with higher prices but most regular families being priced out. In California you have over 2.3 million adults living with other adults because of financial challenges. Housing is an illiquid asset. At any point, you can buy a share of Google or Apple stock and sell it back practically in the same day. Not so for housing. At any given point only a short supply of total housing is on the market. Currently housing is priced for investors and not your typical family. Forget about younger Americans that are saddled with large levels of student debt and have lower incomes. When it comes to housing, the kids aren’t alright.

This post was published at Doctor Housing Bubble on November 30th, 2014.

The Imploding Energy Sector Is Responsible For A Third Of S&P 500 Capex

We have previously discussed the implications that tumbling crude oil prices will have not only on some of the most levered companies with exposure to Brent prices, namely the vast majority of the US energy space with outstanding junk bonds which, as we explained before, should WTI drop to $60, it would “Trigger A Broader HY Market Default Cycle” (based on a Deutsche Bank analysis) leading to pain across the entire credit market (and in the process impairing the stock-buyback machinery which companies aggressively use to artificially boost their stock price), as well as on oil-exporting nations, whose economies are assured to grind to a halt leading to broad social unrest or worse, and lastly, on global asset liquidity, which is set to contract even more now that for the first time in over a decade, the net flow of Petrodollars will be an outflow (as explained in How The Petrodollar Quietly Died, And Nobody Noticed).
And while much has been said about the “benefits” the US economy is poised to reap as a result of the plunge in gas prices, which has been compared to a major tax cut (whatever happened to the core Keynesian tenet that “deflation” is the worst thing that can possibly happen) on the US consumer, almost nothing has been said about the adverse impact on US GDP as a result of tumbling fixed investment spending and CapEx.

This post was published at Zero Hedge on 11/30/2014.

I’ve Been Thinking About How the Current Madness Will End

It always pays to be cautious when other investors get greedy. By Porter Stansberry, The Growth Stock Wire:
Perhaps more than just about any other research firm in the world, we’ve long warned that there will be serious consequences for the decisions we’ve been making lately.
But credit bubbles feel so good as they’re being blown up that it’s easy to forget what’s really happening behind the curtains to create the faux prosperity we’ve been enjoying for the last few years. So this week, here’s a gentle reminder about what’s really behind the soaring stock market and our growing economy.
The world’s three major central banks (the U. S., Europe, and Japan) have embarked on a massive financial experiment. They have created a gigantic amount of money out of thin air and used it to purchase mind-boggling quantities of government debt. In the U. S., our central bank now owns a pile of bonds equal to 20% of U. S. gross domestic product (GDP). Japan’s central bank’s pile of debt is equal to 40% of its GDP. At its peak, Europe’s central bank owned bonds worth nearly $4 trillion, or more than 25% of its GDP.
The effect of this buying in the world’s markets is difficult to overstate. It is not only the sheer enormity of these purchases. It is also the way the bankers have deliberately structured their purchases to warp the yield curve.
Consider the U. S. 10-year Treasury bond, for example. There is no more important financial benchmark in the world. It is hardly an exaggeration to claim that everything tradable in the world is priced off U. S. sovereign 10-year bonds. This is the globe’s benchmark cost of risk-free capital. It is from this price that all other forms of capital are priced.
Currently, there is about $150 billion worth of 10- to 15-year bonds outstanding. Out of the total $150 billion in circulation, the U. S. central bank owns more than half. Likewise, at the ‘long’ end of the curve, the Fed owns nearly half of all Treasury bonds dated 20 years and beyond.
By lowering long-term bond yields, the Fed has artificially reduced the cost of capital by an unbelievable amount. And by making it much cheaper to borrow, the Fed has enabled virtually all borrowers to gain access to the bond markets. That’s clear by looking at the record-high issuance and record-low nominal yields in the high-yield (or ‘junk’) bond markets.

This post was published at Wolf Street on November 30, 2014.

TFMR Podcast – Saturday, November 29

http://media.tfmetalsreport.com/audio/14Nov29Dt517V6a.mp3
There are certainly some signs that we once again stand near the edge of the precipice. Therefore, I thought I’d just make this podcast immediately public.
It’s not that this podcast is full of incredible analysis or earth-shattering information. It just seems to me that the world might be once again barreling toward financial crisis. Since there are likely quite a few visitors to this site who sense the same, I simply felt like I should make this podcast public.
For today, we discuss these charts. First, crude:

This post was published at TF Metals Report on November 29, 2014.

11.30 While America Ate and Shopped Mini-Crashes Rocked the Markets

While Americans ate, partied, and shopped until their credit cards cried ‘uncle,’ markets around the world experienced a mini-crash which despite the protestations of the CNBCBBGFBN propaganda and infomercial sales forces will have consequences for the American economy and indeed the future of our consumer and debt driven economy. One chart sums up the coming crisis but it is not one that will be publicized by the mainstream infomercial financial media nor many if any mainstream economists:

Why is this chart of the monetary base expanding rapidly (and now contracting slightly) versus the M2 Monetary Velocity so important? It screams deflation despite an attempt by the Federal Reserve and other central banks around the world to create demand and thus create inflation to force economic expansion. The Keynesian theory of economics is in its final death throes but the reality is that instead of releasing the ties that bind the banks and governments of the world are in fact doubling down and increasing their stranglehold on capitalism by increasing their interference of normal economic activity by adding on to their command control economic system.

This post was published at John Galt Fla on November 30, 2014.

Thin Thanksgiving Blunder

It’s always great to have a few days off. And I hope you enjoyed yours with family and close friends. We do have so much to be thankful for, even while gold was hit in quiet trading while many people were looking the other way, or passed out on the couch in a turkey coma.
A solid week for markets even though it was quiet, although Friday’s lack of volume allowed some stocks to be pushed around a bit. But that should not last once traders and volume return Monday.
Gold and silver were also hit Friday along with oil on the OPEC decision not to decrease oil production. You really don’t see oil move this much ever, or with such ferocity.
It is hard to say too much about the metals until we see traders return. In any case let’s take a look anyhow.

Gold lost 2.97% for the week, all on Friday while traders were mostly away. Gold was solid and setting up perfectly for higher prices all week until Friday’s half day. Breaking $1,180 is not a good sign at all, but with Thanksgiving Thursday being a holiday, it is hard to take it too seriously yet.
I need to see how gold acts Monday..and overnight Sunday before I can say we are rolling over once again.
Large volume pushing gold lower Friday is a bit odd, especially considering how little volume silver saw pushing it lower.
For now, we may be broken but I do need to see a bit more confirmation that this is real and Monday should tell the tale.

This post was published at Gold-Eagle on November 30, 2014.

Krugman: ‘Sticky Wages I Win, Flexible Wages You Lose’

The fun thing about Paul Krugman is that you often can use his own charts against him. For a recent example, consider the issue of ‘sticky wages.’ One of the typical complaints against a hardline ‘the market always clears’ position is to say that, for whatever reason, employers are reluctant to actually reduce nominal wage rates. Therefore – the interventionist argument goes – the normal mechanisms of market recovery to a drop in demand don’t work if the new market-clearing wage rate is lower than before. This leads to involuntary unemployment because the market is simply stuck. Therefore, we need the State to come in and run budget deficits to boost Aggregate Demand.
In a recent post, Krugman thought he laid down a trump card making this point, with the following commentary and chart:
But there’s a lot of denial out there. Recently David Glasner deconstructed a WSJ op-ed calling for a return to the gold standard, which was as out of touch as you might expect. But what got me was the approving citation of Robert Mundell from 1971 (!) declaring that the Keynesian model was irrelevant to modern economies because it assumed pessimistic expectations and rigid wages. Right: no pessimism out there these days. And no sticky wages; oh, wait:

This post was published at Mises Canada on November 30th, 2014.

Podemos “Economic Manifesto” Calls for Debt Restructuring, Spain to Abandon the “Euro Trap”

The Podemos party, a far-left populist party in Spain led by Pablo Iglesias, has come from out of nowhere to lead the polls.
Podemos’ economic manifesto includes debt restructuring, exiting the European Monetary Union, and a jobs program to end unemployment.
The plan was drawn up by Vincen Navarro and Juan Torres, two Spanish economists.

This post was published at Global Economic Analysis on November 30, 2014.

Capturing the China Cat

Look for awhile at the China Cat Sunflower Proud-walking jingle in the midnight sun Copper-dome Bodhi drip a silver kimono Like a crazy-quilt stargown Through a dream night wind Krazy Kat peeking through a lace bandana Like a one-eyed Cheshire Like a diamond-eye Jack A leaf of all colors plays A golden string fiddle To a double-e waterfall over my back Comic book colors on a violin river Crying Leonardo words From out a silk trombone I rang a silent bell Beneath a shower of pearls In the eagle wing palace Of the Queen Chinee
– Robert Hunter
I noticed that the recent precious metals price bounce was attributed to the decision of the European Central Bank and the Peoples Bank of China (PBOC) to go ‘all in’.
Both central banks made new official stimulus announcements. I don’t think the events were related to price. However, China is far from disconnected from that which will ultimately drive value.
China, almost by definition, is a heterogeneous entity. There is no way to properly elucidate or define such a large, complex, and ever-changing entity. China can be understood or described by using only the broadest of strokes and a sterile canvas.
Economics and finance can serve as one such portrait. China will lurch toward achieving first world status – but it will not go without spillover effect with the surround. Hence the wars will go on.

This post was published at Silver-Coin-Investor on Nov 30, 2014.

WHAT HAPPENED TO THE GOLD CORRELATION?

The correlation between gold and the national debt was clear for 13 years. It made perfect sense in a free market. You can’t print more gold. It is a relatively scarce metal that has represented wealth for centuries. Fiat currency can be printed at will by corrupt bankers and politicians. Every paper currency ever created eventually reached its intrinsic value of ZERO, as human beings always take the easy way in attempting to create wealth.
So what happened in 2013? The national debt has gone from $16.5 trillion to $18 trillion, but the price of gold has dropped from $1,750 to $1,200. Is gold no longer a store of value? Is creating $2.5 billion per day in new debt now the path to long term prosperity and wealth accumulation? If gold is no longer insuranceagainst the corrupt machinations of bankers and politicians, then why are China and Russia accumulating as much physical gold as they can get their hands on?

This post was published at The Burning Platform on 30th November 2014.

Marc Faber Emphasizes Need For Gold

Veteran investor Marc Faber, author of The Gloom, Boom and Doom Report, reiterated the need for gold in a diversified portfolio when interviewed last week on CNBC.
Faber, a resident of Thailand, is an advocate of gold storage in Singapore, and believes that a diversified portfolio will help protect against future market corrections which he believes are on the horizon.
Faber doesn’t see further new highs this year in the U. S. equity markets, and thinks that there could be an S&P correction of between 10% and 30%. While admittedly Faber has been expecting a U. S. stock market correction for some time now, his view is based on what he sees as weaker earnings from some US consumer bellwether companies.
Additionally, on a technical level, Faber points to a lower participation rate of S&P stocks making new highs and more stocks making new lows. He looks for an acceleration of weakness in credit markets starting in the high yield (junk bond) market – which has already weakened – and continued weaker corporate earnings.

This post was published at Gold-Eagle on November 30, 2014.

Swiss Vote on Gold & Anti-Immigration Today

Today will be the Swiss vote on the issue of holding and buying gold. The Swiss National Bank opposes the Yes Gold Vote but there is also an immigration referendum. The Swiss are being asked to vote on a proposal to make the central bank hold a fifth of its reserves in gold within five years. That would mean buying about 1,500 metric tons, or 1,650 short tons, of gold worth more than $60 billion. Of course that is a drop in the bucket within the global economy. Heck – bailouts of individual banks have exceeded that number.
The initiative seeks the backing of a majority of voters to compel the Swiss National Bank from selling gold and would require that Swiss gold must be locked away in vaults entirely on Swiss soil. Naturally, the prospect has been touted as the savior for gold and the routine bulls claim this will set in motion a spike in gold prices globally with a new bull market. Yet these are the same claims constantly from the gold promoters who simply fail to grasp what is really unfolding within the global economy.
The nationalist Swiss People’s Party has brought the ‘Save our Swiss Gold’ initiative, arguing it will restore trust in the central bank and its paper money. However, money has transcended the old system of pretending to be merely a receipt for an inconvenient commodity store in the vault. The proposal is opposed by the government and financial leaders. Nevertheless, this is the result of a rising trend of civil unrest. This’Save our Swiss Gold’ referendum target a growing sense of caution among the Swiss about the perceived dangers and increasing volatility of financial markets. However, it is also coupled today with the immigration issue. The Swiss are voting in a referendum on whether to curb net immigration to no more than 0.2% of the population, in a vote heavily criticized by the main political parties as well. If passed, the measure would require the government to reduce immigration from about 80,000 to 16,000 people a year.

This post was published at Armstrong Economics on November 30, 2014.