Why the Markets’ Sudden Love for Mexico?

By Don Quijones, freelance writer, translator in Barcelona, Spain, but currently in Mexico. Raging Bull-Shit is his modest attempt to challenge the wishful thinking and scrub away the lathers of soft soap peddled by political and business leaders and their loyal mainstream media. This article is a Wolf Street exclusive.
If there’s one word that has dominated the post-crisis vernacular of policy makers, central bankers, economists, think tanks and establishment journalists worldwide, it is the word ‘reform.’ In the last six years of centrally planned post-crisis crisis, scores of countries have been subjected to ‘ambitious’ reform programs, largely at the insistence of reform-obsessed institutions such as the IMF.
The programs have included health reform and education reform (in both cases with a heavy emphasis on privatization and increased costs); pension reform (cuts to public pensions, hikes to the entitlement age); fiscal reform (less spending on public services, more spending on deadbeat banks – all funded, of course, by higher taxes on the middle class); and, last but not least, labor reform (making it easier for corporations to hire and fire but mainly fire). In fact, we’ve had just about every kind of reform one can possibly imagine, with one glaring exception: meaningful banking reform, for the simple reason that by now the banks are far beyond reform.
The Great Reformer
One country that has recently taken reform to an art form is Mexico. Since taking office in late 2012, President Enrique Pea Nieto has made it his mission to transform Mexico beyond all recognition. And judging by the first 21 months of his six-year mandate, he means business.

This post was published at Wolf Street on September 14, 2014.

Jobs Friday – -When Bubblevision Misses The Epic Failure Of The US Labor Market

CNBC’s long-running ‘jobs Friday’ fetish is getting downright appalling. Each month the BLS puts out a treasure trove of data on the rich and complex mosaic of the US labor market – -a download that embodies a truly frightening trend of economic failure.
Yet the talking heads who assemble in its screen boxes to opine on Hampton Pearson’s 30-second summary of the BLS release never have a clue. In their allotted 15 seconds of fame, they merely bloviate about the single dumbed-down number – -the establishment survey jobs print – that is the sum and substance of the coverage.
Trained seals would be just as effective: ort! ort! ort!
In any event, within seconds the SPX futures are off to the races, flashing the trading algos’ instant take on what the ‘print’ means for one thing alone. Namely, does it portend continued or even more ease at the Fed and a plentitude of juice for Wall Street speculators.
Last Friday CNBC inadvertently indicted it own pandering when the winner of its ‘pick the number’ contest hit 142,000 jobs right on the head, making a mockery of the 200-250k consensus range that had issued from the ‘experts’. The winning viewer’s name was Ronnie Squires, who described himself as ‘retired’ and the owner of a (very) small business through which he occasionally transports unwanted cats and dogs in his pick-up to new out-of-state ‘homes’ for friends. Along the way, he does his own jobs survey:

This post was published at David Stockmans Contra Corner on September 14, 2014.

Keiser Report: Global Ponzi Scheme (E563)

The following video was published by RT on Sep 13, 2014
In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the ‘sans dents’ as the new ‘sans culottes’ as the bubbles will continue until morale improves. They also discuss inflation without compensation. In the second half, Max interviews David Smith of the Geneva Business Insider Blog about the Swiss Gold Initiative, the impact of sanctions and the wave of anti-EU sentiment spreading across Europe.

Taking an exit from the labor force: Over the last ten years 16 million Americans have dropped out of the labor force.

The US economy has not recovered in typical fashion. Following the Great Recession, we witnessed a large growth in those not in the labor force. Part of this has to do with anolder population but that does not address the issue completely. The US has added 16 million people to the ‘not in the labor force’ category over the last decade and this trend has also assisted in padding the unemployment numbers. How so? If you are not in the labor force, you are not counted therefore the rate miraculously drops. It would be one thing if all older Americans were entering retirement age with adequate savings. This is simply not the case. Many Americans are simply broke and their version of retirement includes working until you drop. You would think that things got better since the recession officially ended back in 2009. The opposite is true since 12 million people have dropped out of the labor force within the last five years alone. In other words, the bulk of the people dropping out of the labor force occurred during a labeled recovery.
Taking an exit from the labor force
All things in economics intersect. For example, many people losing their jobs have decided to go back to school to pursue other avenues and careers. With the high cost of college, the student debt bubble continues to expand. These people selectively remove themselves from the workforce. However, a large portion of the growth has come in the form of people losing work and simply not being able to find it again. Many find work with wages that pale in comparison to what they once earned.

This post was published at MyBudget360 on September 13, 2014.

Options Witching Effects on Stock Prices

These days, there are lots of different options expirations available, so no single expiration is quite as important as it may have been in the past when availability was much more limited. Even so, some options expiration dates, such as the September 20, 2014 are more significant than others because they coincide with expirations of other derivative contracts, namely futures.
When the expirations of options and futures coincide – generally on the third Friday of March, June, September and December – the effect on the stock market can be magnified. The term witching is often used synonymously for the final hour of expiration. Triple-witching or quadruple-witching simply refers to the number of options or futures expiring at the same time.
Witching occurs this Friday, September 20.
To understand the potential effects of witching this week, it may be helpful to take a look at the reasons that options expiration can affect stock prices. Once the reasons are known, it should become easier to notice the effects, thus allowing trader to differentiate those effects, which are generally temporary, from the effects of broader-market forces, which may be more permanent.
Nobody likes to be stopped out of a stock during witching only to have the stock reverse when the effect of witching disappears the following week. The following analysis looks specifically at this Friday’s options witching on the S&P 500. To begin, it is important to know what types of options are currently profitable.

This post was published at ZenTrader on September 14, 2014.

14/9/2014: Update: Sanctions Round 4: Russian Banks, Stocks & RUB

Updating my chart on Russian stock market performance:
A very interesting set of statements from Sberbank Chairman, German Gref on the impact of sanctions on Russia’s largest bank. Two source articles for this are: quotes from the above:
External funding markets are already de facto closed [for Sberbank] – including markets for debt under 90 days (recall, debt over 90 days is directly restricted under the sanctions). De facto, per Gref, sanctions are much tighter than de jure. Hard currency liquidity position of the banks is severely disrupted.

This post was published at True Economics on Sunday, September 14, 2014.

California Home Sales Dive, Prices Hit Wall, Millennials Blamed

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.’

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


‘Facts are stubborn things, but statistics are pliable.’ ‘ Mark Twain
I never believe government manufactured numbers. They will always be adjusted, massaged, and manipulated to achieve a happy ending for the propagandists attempting to control and fleece the sheep. Yesterday, the government produced retail sales numbers for August that were weak and the corporate MSM propaganda machine immediately threw up bold headlines declaring how strong these numbers were. Positive stories were published on the interwebs and Wall Street hack economists were rolled out on CNBC, where the bubble headed bimbos and prostitutes for the status quo like Jim Cramer and Steve Liesman declared the recovery gaining strength. Woo Hoo.
If everyone else is whipping out that credit card, why aren’t you? Credit card debt has reached a new post recession high. They tell me consumer confidence is soaring. Forget about the 92 million working age Americans supposedly not in the labor force. Forget about real household income hovering at 1999 levels. Forget about median household net worth still 30% lower than 2007. Forget about what you see with your own two eyes in malls, strip centers and office parks as you motor around our suburban sprawl empire of debt. Those Store Closing, Space Available, and For Lease signs mean nothing.

This post was published at Washingtons Blog on September 14, 2014.

Ron Holland: For Freedom’s Sake, No More ‘Mr. Nice Guy’

Introduction: Ron Holland is a contributing editor to several newsletters dealing with political and investing topics and author of several books, including Escape the Pension Trap. Originally from North Carolina, Ron lived in Geneva from 2003 to 2004 and divided his time between the US and Europe until 2012 when he moved to Toronto. Ron has developed and introduced several innovative investment products to investors in the US, including the first Swiss-franc denominated variable annuity portfolio licensed in the US.
In his writing and conference presentations, Ron emphatically advocates global investment diversification into foreign currencies and non-US markets as essential for protection from the US government’s growing debt. Holland is particularly concerned about the vulnerability of retirement funds in the US, and consults to leading financial solutions providers seeking to provide viable options for citizens seeking protection. Ron’s latest book is Restoring Our American Legacy.
Daily Bell: Good to catch up with you, Ron, and thanks for making time to talk with us today. You recently lived through a signifiant, life-altering event. Care to tell our readers about it?
Ron Holland: It is sort of embarrassing, to say the least. About 30 years ago my ex-wife nagged me to go to the doctor for a check-up. Everything was fine except for high cholesterol and very high blood pressure. My solution was simply not to go to the doctor again for the next 30 years. This was not one of my better decisions, in retrospect.

This post was published at The Daily Bell on September 14, 2014.

A Dog’s Life

Richard (Rick) Mills Ahead of the Herd
As a general rule, the most successful man in life is the man who has the best information
Disregard disease (Ebola), rising sea levels, simmering religious tensions, the potential for wars over resources. Disregard financial calamity, malfunctioning governments and lying sleazebag politicians leading us down the garden path. Is Europe going to be Balkanized? Is it to be inflation, disinflation, deflation or stagflation?
Nothing important, to me anyway, seems to matter much anymore. The herd’s got other things on its mind.
Justin Bieber got thrown into jail, Oprah’s fat, Jennifer and Angie had a catfight over Brad, there’s a new iphone coming and America’s supposedly Got Talent.
Maybe the following will wake the herd up. It’s only the best reason any of us has ever heard for owning some gold and silver bullion in an easily accessible stash. It’s something so devastating, so cataclysmic, so life changing, so unstoppable that the only way to survive the resulting wasteland would be to own precious metals and guns. Something so indefensible against, something so game changing that I’m talking about each and everyone one of us on this planet taking a forced trip back in time.

This post was published at Silver-Investor on September 13, 2014.

Metals Melting Lower

General markets continued to consolidate while we are seeing some nice moves in select stocks still. It is a stock pickers market at the moment and I am a stock picker!
Gold continued to roll over this past week as its chart has been suggesting. I’ve been right on weakening gold for some time and I don’t see any sign of a bounce to come yet, although now that I said it out loud we may bounce!
I don’t like to talk about my successes…but suffice to say, my email load has gone down significantly lately as the perma-bulls are either accepting that gold can weaken further or simply can’t admit being wrong.
While we’ve had some spectacular winners over the past month and a half, I’ve also taken several small losses and a few that quickly got away from us and grew to more of a loss than I’d have liked. On balance though, winners are outweighing losses and that is what matters.
I will never expect to have all winners, although it does happen sometimes, but being able to control and sell losers quickly allows the winners to take care of themselves.
I’m far from perfect and focus on and try to learn from my losses. Always learning and improving at this game is so much of the fun of it.

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

Toothless Barking Dogs; Don’t Like the Rules? Then Ignore Them: French Style

Don’t Like the Rules? Then Ignore Them: French Style
When it comes to fiscal policy in the EU, you can break whatever fiscal rules you want, provided you are big enough.
France qualifies, so does Germany. If you are small like Greece and Cyprus, then you may find yourself in bed with the Troika.
For the third time France Warns of Budget Overshoot
France has declared it will heavily overshoot its already twice-delayed budget deficit target next year, setting up tough negotiations with European partners previously reluctant to grant Paris more time to bring its public finances within EU limits.

This post was published at Global Economic Analysis on Sunday, September 14, 2014.

Caught On Tape: Uber X’s Latest Driver, Deadmau5 Taking Fares In His $300,000 Mclaren 650S

While Uber faces lawsuits and blockades around the world, it appears Toronto just took the Taxi 2.0 experience to a whole new level. Deadmau5, the famous Canadian DJ, is the latest to become an Uber X driver, and as Jalopnik shows below, he turns up in his brand new Mclaren 650S to pick up a few fares…

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

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 StockCharts.com 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.