They’re Coming For Your Cash

Submitted by Mark Nestmann via Nestmann.com,
It might sound like a conspiracy theory spun by right-wing crazies. But judging by the increasing desperation of governments to reboot the world economy, it just might happen.
‘It’ is the recall or confiscation of cash, i.e., dollars, euros, pounds, etc., in physical form. And a key justification that those calling for this radical measure cite is that it reinforces the ability of central banks to impose negative interest rates.
Negative rates mean that lenders literally pay businesses and consumers to borrow money. They also penalize savers for hoarding it. The Danish and Swiss national banks have gone the farthest into negative territory, with interest rates of -0.75%. That means 100,000 in a euro-denominated account in Switzerland would be worth only 99,250 after one year. While these rates apply only to ‘excess reserves’ banks maintain at the central bank, nothing stops banks from requiring depositors to share the pain.
But that’s not enough, according to some economists. Citicorp’s chief economist, a technocrat named Willem Buiter, thinks the US needs much lower interest rates to push the economy out of the doldrums. He thinks negative interest rates around -6% would do the job. But there’s one condition: For his plan to work, he says, the government must abolish cash.
It’s easy to understand why Buiter might not have warm and fuzzy thoughts about cash. After all, if your bank is taking 6% from your savings, $100 in your account would be worth only $94 at the end of one year, $88.36 after two years, and $83.06 after three years. On the other hand, a $100 bill with Ben Franklin’s picture on it would still be worth… well, $100. Buiter understands that as long as cash exists, no one will voluntarily keep their savings in accounts with negative interest rates.

This post was published at Zero Hedge on 11/15/2015 –.

The Fed Gave Wall Street The Lowest Rates In 5000 Years & All Main Street Got Was This

It’s simple – in theory – a central planning body, who knows what is best for the rest of society, lowers interest rates (to reduce the cost of capital, encourage entrepreneurial actvities, and stimuluate the economy – and therefore jobs – for the average joes and josephines of the world).
So the ‘smartest people in the room’ cut interest rates, lowering the cost of capital to the lowest in 5000 years…

This post was published at Zero Hedge on 11/15/2015.

The Closed Mind Discovers Nothing but Bias

A number of people have been writing in to say how they just discovered the mathematical constant (pi) in a quantum mechanics formula for the energy states of the hydrogen atom. This is truly astonishing proving the is a fundamental cornerstone of nature.
While I discover the existence of pi in the business cycle, it has been widely discovered in many other fields. What this proves is precisely what I have been saying all along – there is an interesting order being masked as chaos. This hidden order is fundamental to everything. This hidden order behind chaos or the appearance of randomness has led many to assume that the world is subject to our will, and therefore, we can manipulate the world, including the economy, to do as we desire. This is just not true. There is a hidden order behind everything if we just explore.

This post was published at Armstrong Economics on November 16, 2015.

Depression Tracker: Brazil Braces For Big Week Of Bad Data

Late last week, Brazil was back in the spotlight on speculation about the future of embattled finance minister Joaquim Levy.
The BRL can’t seem to decide if the uncertainty surrounding a Levy exit should outweigh any optimism around a Henrique Meirelles appointment, and it all comes against the backdrop of Brazil’s stagflationary nightmare that has plunged one of the world’s most important emerging economies into what, on some measures, certainly looks like a depression.
To be sure, the pace at which the situation continues to deteriorate in terms of Brazilian economic data has been something to behold and indeed, many fear the combination of rising unemployment and overleveraged households could be a ticking time bomb especially in places like the southern end of Sao Paulo, where, as Bloomberg documented last month, people like 43-year old steelworker Rossini Santos are now relying on unemployment insurance to service debt incurred to buy small homes and cars.
This week, we’ll get a fresh look at three key Brazilian depression recession trackers: GDP, inflation, and unemployment. Here’s Goldman with the preview and a few charts which serve to underscore the malaise.
* * *
From Goldman
The central bank will release on Wednesday the IBC-Br monthly real GDP indicator. We expect real GDP to decline 0.6% mom sa in September; the fourth consecutive monthly decline. This would be consistent with a 1%-plus qoq sa decline in real GDP during 3Q2015, and a contraction of real GDP during 2015 topping 3%.

This post was published at Zero Hedge on 11/15/2015.

Bloodletting Eight Trading Days in a Row

Sucker Rally in Junk Bonds Goes Totally to Heck. The US junk-bond market, after years of record-breaking issuance, has nearly doubled to $1.8 trillion since late 2008, one of the miracles the Fed’s QE and ZIRP performed. Those were the good times. Now Fed-blinded investors are cracking open their eyes.
It didn’t help that the week was punctuated by some juicy bankruptcies, including steelmaker Essar Steel Algoma, which filed in the US and Canada – for the second time in two years and for the third in 25 years – as it struggles with over $1 billion in debt. And Millennium Health, a malodorous mess I wrote about in July [‘Leveraged Loan’ Time Bomb Goes Off, JP Morgan Did It].
Energy junk bonds are sinking deeper into the mire. For example, natural-gas driller Chesapeake Energy’s 6.625% notes due in 2020 fell 7 points last week to 58 cents on the dollar. Or the misbegotten Occidental Petroleum spin-offCalifornia Resources; according to S&P Capital IQ LCD, its 6.00% notes due 2024 dropped to 64.50 cents on the dollar.
Beyond energy, specialty chemicals maker Hexion’s 6.625% notes due 2020 fell to about 81 cents on the dollar. And Mallinckrodt Pharmaceuticals, based in Ireland, with its US headquarters in St. Louis, Missouri, got hit by a tweet from short-seller Citron Research, after it took a break from eviscerating Valeant. As Mallinckrodt’s shares plunged, its 5.625% notes due 2023 dropped from 94 before the tweet into ‘price discovery,’ with quotes around 85.

This post was published at Wolf Street by Wolf Richter ‘ November 16, 2015.

Guest Post: Gold, Oil, & ‘Grandmaster’ Putin’s Trap

Via The Oriental Review,
In December of last year we published an intriguing article by Dmitry Kalinichenko, ‘Grandmaster Putin’s Trap,’ which has drawn far more attention from readers than we ever expected. It continues to be cited by many international political and economic experts. That article addressed Russia’s latent strategy to get rid of US bonds and use its petrodollars to buy monetary gold. It seemed for a while that the ruble’s nosedive late last year, coupled with the Kremlin’s reduced fiscal space, has left Moscow unable to pursue its plan to permanently diversify the international financial system. Nevertheless, taking a look at 2015, it turned out that Putin’s strategy is working quite well.
Due to invisible market’s hand the gold-to-oil price ratio has more than doubled in the past two years. While in May 2014 it costed 12 barrels of oil to buy one ounce of gold, this ratio rose to 26barrels/ounce in January 2015 (where it currently remains). By lowering the price of oil relative to gold, it looks like Wall Street & London’s City are trying to hamper Russian tactic of buying gold in exchange for oil and natural gas (gas prices are linked to oil via BTU). However, these actions fell short of their goals.
Declining oil prices and a depreciating national currency have not led to a slowdown in the Bank of Russia’s gold purchases on the domestic market for rubles. Despite threats and sanctions, Russia has continued to add to its gold reserves. Bank of Russia bought a record 171 tons of gold in 2014 and another 120 tons in the first ten months of 2015. Consequently, by Nov. 1, 2015 the Bank of Russia had accumulated a total of 1,200 tons of gold in its reserves, which are officially the fifth largest in the world, although in reality Russia is actually in 4th place, as Germany is allowed to store only one-third of its reserves at home. In fairness it should be noted that China has not provided updated data on its gold reserves since 2009, when it officially possessed 1,054 tons. According to some estimates, Chinese reserves may have tripled since than.

This post was published at Zero Hedge on 11/15/2015 –.

Connecting the Dots: The Peril and Opportunity of China

Last week, I wrote about the massive pollution problems in China and the gigantic investment opportunity in the cleanup. However, China is a volatile, dangerous place to invest, and there is a wrong way and a right way to do so.
Where do you stand on the Chinese economic debate? Is the China economy decelerating so fast that it will pull the rest of the global economy down with it? Or do you think that the reports of China’s economic death are greatly exaggerated?
NOTE: I welcome your comments – GOOD and BAD – and encourage you to take advantage of the message forum at the end of these issues. Please!
No question, China is not growing at the breakneck pace that it has been.

This post was published at GoldSeek on Friday, 13 November 2015.

No Serious Financial Repercussions from the Paris Attacks? Don’t Be Too Sure

Global sentiment might switch decisively from “risk-on” to “risk-off” with far-reaching consequences. Goldman Sachs has helpfully announced that any financial repercussions from the attacks in Paris will be short-lived, and the political repercussions will be medium-term: Increased uncertainty likely to weigh on activity and increase market volatility in the short run (via Zero Hedge).
The analogies invoked to support this rosy view are the attacks in Madrid in 2004 and in London in 2005–tragedies that weighed very briefly on the global orgy of financial gains between 2003 and 2007.
But isn’t it obvious that the world of November 2015 is not the world of 2004?The global economy is not in a cycle of robust expansion of debt, wages, consumption, profits and stock valuations as it was in 2004.
Now, debt is softening or being revealed as impaired, wages are stagnant for the bottom 90%, real sales are down once subprime-auto-loan enabled vehicle purchases are subtracted, profits and forward projections for sales are crumbling, along with stock valuations.

This post was published at Charles Hugh Smith on SUNDAY, NOVEMBER 15, 2015.

Breadth, Buybacks, & The Piercing Of The “Grandaddy Of All Bubbles”

Submitted by Doug Noland via The Credit Bubble Bulletin,
The ‘Granddaddy of All Bubbles’ thesis rests upon the view that the world is in the midst of the precarious grand finale of a multi-decade global Credit and financial Bubble. When a Bubble bursts, system reflation requires an even larger fresh new Bubble. This has repeatedly been the case going back at least to the ‘decade of greed’ late-eighties Bubble in the U. S. These days the world confronts the terminal Bubble phase partially because of the unprecedented scope of the China and EM Bubbles. It’s simply difficult to imagine another more far-reaching Bubble.
Also critical to the finale Bubble thesis is that the ‘global government finance Bubble’ – encompassing unprecedented excesses in sovereign debt, central bank Credit and government market manipulation – has engulfed the very foundation of contemporary ‘money’ and Credit. It’s again quite a challenge to envisage a new financial Bubble inflation cycle following a crisis of confidence at the heart of global finance.
As I’ve posited repeatedly, the global Bubble has been pierced. There’s more confirmation again this week. The collapse in commodities and EM currencies along with the faltering Chinese financial Bubble mark an historic inflection point. Global policymakers have gone to incredible measures to stabilize market, financial and economic backdrops. Yet reflationary measures will continue to only further destabilize.
When policy-induced ‘risk on’ is overpowering global securities markets, fragilities remain well concealed (and my prognosis appears ridiculous). Fragilities, however, swiftly manifest with the reappearance of ‘risk off.’ Rather quickly securities markets demonstrate their proclivity for illiquidity and so-called ‘flash crashes.’ So after an unsettled week in global markets, the critical issue is whether ‘risk on’ is giving way to ‘risk off’ dynamics.

This post was published at Zero Hedge on 11/15/2015.

“It’s Different This Time” Or “Same As It Ever Was”

Authored by Mark St. Cyr,
Over the past few years when it’s come to any criticism of business models, valuations, or other concerns encompassing the social media space, along with other dubious ‘hacking’ inspired businesses emanating from Silicon Valley, the immediate rebuttal posed fell along the lines of first being looked as ‘you just don’t get it’ (or just crawled out from under some rock) followed with, ‘It’s different this time.’
If one posed any real push back as to move nebulous assertions out from the sky and back into more true ledger accounting? Those ‘looks’ turned into outright disdain, and disgust followed with ridicule as the assertions of ‘It’s different…’ and ‘You just…’ morphed into closing statements as to implicitly cement the questioning door closed. For to go any further, it was a waste of their time and/or breath. After all, why try to prove you’re right when today’s version of the teenage ‘Because! Just because!’ works just as handily.
Over the past few years that defense has worked splendidly. Only problem? Just like with teenagers; there comes a time it no longer works. This is where the once go-to responses begin to work against – not for. Welcome to same as it ever was. Or, one could say, ‘Welcome back to reality.’ Where nebulous business plans no longer attract attention never-mind – cold hard cash.
As a matter of fact, what has been recently embraced as some entrepreneurial birthright in Silicon Valley (i.e., VC funding at the whim) seems to be going the way of ‘Because…’ itself.
You’re not hearing precise reasoning or explanations for it (although the reasons are as clear as day: No QE.) However, what you are beginning to now see are the inevitable storm clouds moving from the horizon, and making landfall. All one needs to do is get their heads out-of-the-clouds and start reading the writing on the walls right in front of them. For the messages they portend are writ large – if one wants to see. Here are a few that have caught my attention…

This post was published at Zero Hedge on 11/15/2015 –.

Companies Vs. Countries: Comparing US Corporate Market Caps To Emerging Markets

Back in July, during the depths of Greece’s fraught bailout negotiations, BofA made a rather amusing observation:
“The market cap of MSCI Greece is now the same as Bed, Bath and Beyond” – BofA
-zerohedge via Twitter-
That’s pretty astonishing, although we’ll admit that during June and July, choosing between spending an afternoon in Athens and spending an afternoon in a Bed, Bath, and Beyond would have indeed been a tough call.
Well, if you’ve ever wondered how your favorite US corporations stack up against the entire MSCI free float market cap of the world’s emerging economies, BofAML has the complete mapfor your viewing pleasure, presented below without further comment.

This post was published at Zero Hedge on 11/15/2015 –.

Japan in Recession Again: How Many Times is That?

Bloomberg notes Japan Enters Recession as Economy Contracts in the Third Quarter.
Japan’s economy contracted in the third quarter on sluggish business investment, confirming what many economists had predicted: The nation fell into its second recession since Prime Minister Shinzo Abe took office in December 2012.
Gross domestic product declined an annualized 0.8 percent in the three months ended Sept. 30, following a revised 0.7 drop in the second quarter, the Cabinet Office said Monday in Tokyo. Economists had estimated a 0.2 percent decline for the third quarter.
Weakness in business investment and shrinking inventories contributed to the contraction amid concerns over slower growth in China and the global economy that prompted Japanese companies to hold back on spending and production. While growth is expected to pick up in the current quarter, the GDP report could put pressure on Abe and Bank of Japan Governor Haruhiko Kuroda to boost fiscal and monetary stimulus. The BOJ holds a policy meeting later this week.

This post was published at Global Economic Analysis on Sunday, November 15, 2015.

What Hath The Fed Wrought?

“Absent the performance on FOMC days, the stock market has gone nowhere in 17 years. If you’re a believer in capitalism and free markets, you sit back and think about that statistic for a moment and ask yourself – ‘have I really made any money without The Fed?’”

This post was published at Zero Hedge on 11/15/2015 –.

Mid-East Stocks, US Futures Slide As Goldman Warns Of Paris Attacks’ Negative Implications For Markets

Following the weakness in the few minutes of after-hours trading on Friday’s US session that overlapped with the first headlines from France, we are getting a first glimpse at the posible fallout from the Paris terror attacks. The Middle Eastern stock markets tumbled significantly with Saudi Arabia’s Tadawul All Share index down 3% (biggest drop in 3 months) to its lowest since December 2012, and Dubai’s FMG Index plunged 3.7% to its lowest since 2014. Short-run implication for the equity market is likely to be negative according to Goldman, with a notably higher risk premium regarding uncertainties about the medium-term political implications.

This post was published at Zero Hedge on 11/15/2015 –.

The Manhunt Begins – 8th Assailant Identified, On The Run

The investigation into the Paris terrorist attacks continues to unfurl across Europe on Sunday, as The New York Times reports the authorities sought a man believed to be an eighth assailant who might have fled after taking part in the three-hour massacre, which killed at least 129 people.
Amid questions about the autheticity of one of the suicide bombers’ passport (conveniently dropped near his body), NBC News reports French authorities were racing Sunday to hunt down any potential accomplices to the wave of terror attacks unleashed in Paris as the investigation widened beyond this nation’s borders.
A French man believed to be directly involved in Friday’s massacre in Paris is on the run and the subject of an international manhunt, French security officials said Sunday evening. Investigators said the man rented a Belgian-registered black Volkswagen Polo, which was allegedly used and abandoned by the hostage-takers who killed 89 people inside a Paris concert hall.

This post was published at Zero Hedge on 11/15/2015.