GDP ‘Good News’ Sparks Bond Buying & Stock Selling, Treasury Curve Crumbles Further

US GDP beat expectations ‘proving’ that government data shows the recovery meme is on track (as long as it doesn’t snow ever again). The market’s reaction… intriguing – stocks shrugged even as a USDJPY pump tried to get things going; gold and silver moved modestly higher; and Treasury yields… fell notably at the long end. 30Y is now trading with a 3.06% handle and 5s30s is back below 145bps…!

This post was published at Zero Hedge on 08/28/2014.

Argentina Proclaims Peso Devaluation “Obviously Won’t Happen” – Just Like It “Vowed” In 2013

May 2013, President Kirchner: “As long as I’m president, those who want to make money through devaluations, which other people have to pay for, will have to keep waiting for another government,”
Jan 2014: Argentina Devaluation Sends Currency Tumbling Most in 12 Years
Aug 2014: Argentina’s Cabinet Chief Jorge Capitanich said today a devaluation of the peso, “obviously won’t happen.”
So what’s next?

This post was published at Zero Hedge on 08/28/2014.

Analyst: Fed’s low interest rates could bring ‘scary’ 60% market crash

Markets could soon face a fall of up to 60 percent, two experts told CNBC on Wednesday.
A jolt to international confidence in central banks will lead to a 30 to 60 percent market decline, David Tice, president of Tice Capital and founder of the Prudent Bear Fund, told CNBC’s ‘Power Lunch.’ When this happens, he said, markets will face a ‘period of extreme turmoil.’
This crash will be precipitated, he said, by a disillusionment with the Federal Reserve’s ‘confidence game,’ which will then see inflation rise, and the Fed scramble to raise rates. At that point, Tice added, ‘the Fed starts to lose control.’
Another market watcher also called for an impending fall.

This post was published at Investment WatchBlog on August 27th, 2014.

Ebola Devastates West Africa: Revenues Down; Markets Not Functioning; Projects Canceled; GDP Plunges 4%

In all of its infinite wisdom, the “market”, which stopped reacting to newsflow or discounting the future some time after the Fed officially announced it would centrally-plan it indefinitely, decided that just like the trade war against Russia is irrelevant only to find itself a week ago with Europe staring at the abyss of a triple-dip recession, so it decided that the worst Ebola outbreak in history is a non-event, even though it has put virtually all of western Africa on indefinite lockdown, and as Reuters reports, is “causing enormous damage to West African economies and draining budgetary resources.” In fact the damage from Ebola to Africa is already so acute, it is expected that economic growth in the region will plunge by up to 4 percent as foreign businessmen leave and projects are canceled, according to the African Development Bank president said.
“Revenues are down, foreign exchange levels are down, markets are not functioning, airlines are not coming in, projects are being canceled, business people have left – that is very, very damaging,” African Development Bank (AfDB) chief Donald Kaberuka said in an interview late on Tuesday.
“The numbers I have had vary from one percent to four percent of GDP. That is a lot in a country with a GDP of US$6 billion,” Kaberuka said, when asked to quantify the impact.

This post was published at Zero Hedge on 08/27/2014.

4 Years Until The Next Recession? Not Likely.

David Rosenberg, in one of his recent missives, wrote:
“Historically, when we are within six months of a recession, the year-over-year trend in the LEI turns negative while the diffusion index falls below 30%. At three-months away, the LEI is down 1% YoY and the diffusion index nears 25%. By the time the recession has hit, the LEI is down 4% year-over-year and the diffusion index is at 20%. Alternatively, based on the current trend in the LEI and the level of the diffusion index, history suggests that the next recession is at LEAST four years away.”

This post was published at StreetTalkLive on 27 August 2014.

US 10-Year Treasury Cheapest in G7, Yield Spread Near Record High

Saxo Bank chief economist Steen Jakobsen point out US 10-Year treasury is the cheapest in G7 with the spread near a record high. Spread of US 10-Year Note Yield vs. G7 Average Yield

Via email Steen says …
US 10 Year cheapest in G-7! This is one of the reasons for my change to US fixed income and short US Dollar.
US 10 Year spread vs. G-7 equivalent now at 79 bps – close to all time high. As the chart indicates there is considerable mean-reversion in this data series.
The market is long, very long the US dollar into ECB and FOMC meetings where consensus quietly is looking for 10 bps cut by the ECB, maybe even announcement of “private” ABS [Asset Backed Securities]. In the US the regional banks want the discount rate normalized, but reality is close by.

This post was published at Global Economic Analysis on August 27, 2014.

Everyone’s Fighting The Fed Now

Yesterday we noted the fact that Biotech stock investors has ‘fought the Fed’ and won (for now) in the last few months after Janet Yellen’s “stretched valuations” warning. With bond yields continuing to collapse, despite Bullard’s ongoing demand that the market ‘sell sell sell’, we thought a glimpse at just how dovish the market is compared to the ‘hawkish’ Fed would be useful…

This post was published at Zero Hedge on 08/27/2014.

I Blame The Central Banks

The current bubbles in financial assets — in equities and bonds of all grades and quality — raging in every major market across the globe are no accident.
They are a deliberate creation. The intentional results of policy.
Therefore, when they burst, we shouldn’t regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of some terribly shortsighted decision-making and defective logic.
The Root of Evil Blame can and should be laid where it belongs: with the central banks.
They were the “experts” who decided to confront the excesses of decades past (which saw borrowing running at roughly 2x the rate of real economic growth) with even easier monetary policies designed to spur even moreborrowing.
Rather than take stock of the simple fact that nobody can forever borrow at a faster rate than their income is growing (no matter how large that entity may be), the Fed, the ECB, the BoJ and the BoE have conveniently overlooked that simple fact and then boldly claimed that the cure is identical to the disease. If the problem is debt then the solution is even more debt.
If the Fed, et al. were doctors, they would prescribe alcohol to the alcoholic. They would administer more lead to the lead-poisoned patient. They would call for more water to put in the pool where a drowning individual is floundering.
The bottom line is that the Fed and its ilk made the disastrous decisions that gave us the first two burst bubbles of the new millennium. And the wonder of it all is that, instead of being met at the gates with torches and pitchforks and held to account for their errors, they have instead been granted even greater powers, less oversight, and practically zero blame.
And now they’ve given us a third and, I suspect, final bubble. By which I mean I think the effects of this bursting bubble will be so horrendous that a hundred years might pass before people will again be in the mood to speculate on fantasy wealth.

This post was published at PeakProsperity on August 27, 2014.

“Valuation Is The Market’s Biggest Headwind”

Yesterday, as the S&P closed above 2,000 for the first time, mainstream media pundits were trotted out to proclaim that either “stocks are ‘fairly’ valued” or “stocks are cheap” and the “money on the sidelines” must come in now. Aside from the ‘idiocy’ of the last comment, we thought BMO’s Jack Ablin’s comments were of note. “Valuation is the market’s biggest headwind,’ he wrote, adding that sales ‘have to catch up’ for stocks to sustain the rally. One glimpse at the following chart and it is clear that not only are stocks “not cheap” or “not fair” they are extremely rich with the only fall-back now being that “they’re not as expensive as they were at the top of the biggest bubble in stocks ever.”

This post was published at Zero Hedge on 08/27/2014.

Will There Be a ‘New Gold Rush?’ — Ian Gordon, Longwave Analytics

Ian Gordon created Longwave Analytics, which studies the Longwave principle, by which economies obey long-term cyclical trends of expansion and contraction. Eric Sprott is an avid reader — he suggested I interview Ian Gordon for his take on the role of Kondratiev’s ‘long wave cycle’ in explaining the economic environment we are seeing today.
Ian said ‘winter’ was coming for the world economy, though it has been staved off by the flexibility provided by paper money. As a result, a depression will be very different today than in 1929 or 1873, he believes. But now, as then, we could see a massive push for new gold discoveries.
Mr. Gordon explained how he got to know Eric Sprott over 10 years ago:
‘I was writing about long-term economic cycles, referred to as ‘Kondratiev’ cycles. In 1998, I realized that we were close to the top of a bull market; we were somewhere akin to 1928 – immediately preceding the Great Depression. Eric appreciated my work, because it helped explain an imminent bull market for gold, which he saw as well.’
I asked: Do these ‘long wave’ economic patterns explain today’s bear market for gold – and the recent rally in general stocks?
‘Well, they didn’t predict this – but they can help explain why it’s happening. Over the course of one entire ‘long wave’ economic cycle, covering a full expansion and subsequent contraction, you have what I call four ‘seasons.’ Winter is the period where debt is wiped out of the economy. It happened after 1929, which caused the US banking system to collapse. During the 1920′s, there had been a big build-up in consumer and corporate debt, as well as sovereign debt.
‘During the Great Depression and the previous depression of 1873, we were on a gold standard system, so the ability to create money was limited. This time around, we are in a pure credit-based system, so the ability to create money withstands the ravages of the winter. Effectively, governments have been creating more debt. This will ultimately cause a more horrendous economic decline than in either 1929 or 1873, as debt levels are far greater today – and because the world is much more inter-connected financially.’
What about your prediction of a ‘new gold rush’ similar to the late 19th century?

This post was published at GoldSeek on 27 August 2014.

SURPRISING UPDATE: Canadian Silver Maple Sales Stronger Than Last Year

In a surprising update, Canadian Silver Maple Leaf sales for the first half of 2014 surpassed sales during the same period last year. According to the Royal Canadian Mint’s Q2 2014 Report, just released, sales of Silver Maples hit a new record of 15.4 million ounces in the first half of the year.
If we look at the chart below, we can see that the Royal Canadian Mint sold an additional 1.4 million Silver Maples in the 1H 2014, at 15.4 million compared to 14 million during 1H 2013.

Thus, 1H 2014 sales of Silver Maples are 10% higher than 1H 2013. If we compare Silver Maple sale to Gold Maple sales, its a totally different picture indeed. Gold Maple sales are down considerably in the first half of 2014. The Royal Canadian Mint sold 681,000 oz of Gold Maples in the 1H 2013, compared to only 337,000 oz in 1H 2014.
This is a stunning 344,000 oz decline in Gold Maple sales or a 51% drop year-over-year. If we combine U. S. Gold Eagle and Gold Maple Leaf sales for 1H 2014, this is the result:

This post was published at SRSrocco Report on August 27, 2014.

Just In: Acquittal – Real Fraudsters were the Banksters!

Real estate flippers avoided criminal conviction because they argued, and persuaded the jurors, that the REAL criminals were the banksters!! No way!!!
‘In an unprecedented trial, four people charged with mortgage fraud were acquitted Friday by a jury in Sacramento federal court after defense attorneys argued the real culprits are the so-called victim lenders.’ Let’s do a little background.
We all know of the real estate boom, and bust, particularly in California, and specifically localized in massive numbers in California’s Central Valley. Essentially, some of us have correctly pointed out that the root cause of the onset of the bubble, were criminal bankers, beginning withBlythe Masters of JPMorgan, who conjured up the scheme of securitized finance for home mortgages. The scheme was simple: the big banks would write loans, using investor money, and none of the banks’ own money. Once the loans were made, the banks would in turn package a thousand loans or so, and bundle them up, then sell them as a whole to investors, as a security. Investors getting first dibs at repayment streams [upper tranches] were paid less interest, than investors who were last to be paid [lower tranches]. The whole theory was that out of the pool of the thousand home loans, not all would default and go bad. Since in the aggregate, most of the loan payments would be paid on time, then those investors at the upper tranches were not risking non-payment as compared to the investors and the lower tranches. The interest rates were balanced against this risk, and the securities were marketed and sold off to investors.
The problem, though, crystal clear to anyone with a brain, from the inception of the whole scheme, is in the incentive structure of the whole mess.
Not a single participant in the scheme had a single incentive to scrutinize the deal. The prospective home loan applicant, wanted a home, and inflated the income and other figures on the application. None of the bankers cared about the fake applications, because the bankers were only going to bundle the loans and sell them off, having no skin in the game and having massive incentives to get more and more loans bundled regardless of the underwriting standards or risk of default.
The investors at the upper tranches cared not. They were guaranteed first payment from the income stream. Their risk of loss was near zero. The lower tranch investors cared not either, as they were getting astronomically high rates of return, and on balance, the risk to them of defaulting payment streams was outweighed by the lucrative returns, much like unsecured credit cards. They figured there would be defaults, but the high interest rates made it, on balance, perfectly acceptable.

This post was published at TF Metals Report on August 27, 2014.

The Five Cities Most At Risk For The Next Big Earthquake

Damages from the earthquake that hit the San Francisco area this weekend are estimated to be as high as $4 billion. For many cities around the world, particularly coastal cities situated on the geologically active Ring of Fire, an earthquake could be catastrophically destructive. Bloomberg looks at the five cities that are most vulnerable to earthquakes.
Don’t get too excited about what happened on Sunday. Scientists assure us that it is only a matter of time before “the Big One” hits California.
In fact, the 6.1 magnitude earthquake that hit northern California on Sunday was not even the largest earthquake along the Ring of Fire this weekend. According to the U. S. Geological Survey, a 6.4 magnitude earthquake shook the area around Valparaiso, Chile on Saturday and a 6.9 magnitude earthquake struck Peru on Sunday.

This post was published at Zero Hedge on 08/27/2014.

CBO “Revises” Its 2014 GDP Forecast, Hilarity Ensues (As Always)

The gross, in fact epic, incompetence of the Congressional Budget Office when it comes to doing its onlyjob, forecasting the future state of the US economy, has previously been extensively documented here (andhere and here and here). This incompetence is in the spotlight once again this morning with the CBO’s release of its latest forecast revision of its original February 2014 projection.
And while every aspect of the revised projection has changed, in an adverse direction of course, the punchline is the chart below: the CBO’s revised projection for 2014 GDP. It’s one of those “no comment necessary” visuals.

This post was published at Zero Hedge on 08/27/2014.

China’s Housing Bubble Has Popped

Those trusting souls who arrived late to the biggest housing bubble in history have lost a lot of money. They are going to lose a lot more.
It’s here at last. Pop.
Writes MarketWatch:
In one case, scores of property owners surrounded a Shanghai sales office of Greentown China Holdings Ltd. 3900, 8.58% GTWCF, -33.19% to protest the developer’s 25% cut to prices within a five-day period, according to a report on the NetEase NTES, 0.67% news portal site 163.com.

This post was published at Tea Party Economist on August 27, 2014.

The Unprecedented Failure to Regulate Citigroup Continues

Yesterday, Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA), charged Citigroup with cheating its customers out of fair prices on preferred stock trades – 22,000 times. Citigroup was fined a meager $1.85 million, ordered to pay $638,000 in restitution, allowed to neither deny or admit the charges, and sent on its merry way to loot the next unwary investor.
Why do we believe there will be more charges of malfeasance in Citigroup’s future? Because it is an unrepentant recidivist. Yesterday’s FINRA fine was the 408th fine that FINRA has levied against Citigroup Global Markets or its predecessor, Smith Barney, for trading violations, market manipulations or failure to supervise its traders or brokers.
And that’s just FINRA – the light-handed disciplinarian with industry ties. Citigroup has kept other Federal regulators, including the U. S. Justice Department, very busy as well.
It is now six years since Citigroup’s serial history of rogue conduct rendered it insolvent. Under the law, the U. S. government is not allowed to prop up insolvent banks with taxpayer money. But from 2007 to 2010, in the largest bank bailout in history, over $2.3 trillion was lavished on the serial recidivist Citigroup.
Citigroup received $25 billion in Troubled Asset Relief Program (TARP) funds on October 28, 2008. Less than a month later, Citigroup had blown through those bailout funds and required another $20 billion TARP infusion. But its situation was so wobbly that the government had to simultaneously provide another $306 billion in asset guarantees.

This post was published at Wall Street On Parade on August 27, 2014.

No Bubble At All: Jessica Alba’s Diaper-Delivery Startup Is Valued At $1 Billion, Prepares For IPO

While today even the pundits are aghast at the latest Snapchat valuation round, which according to the WSJ has Kleiner Perkins inject a laughable $20 million into the private-parts photography service, boosting its valuation to a whopping $10 billion in a clear windowdressing mark-up round, up from $800 million a year ago, even as the actual equity invested into the company is a paltry $160 million or under 2% of said valuation, the true indicator of just how bubbly the second coming of the dot com era has become comes courtesy of none other than Jessica Alba’s, yes the actress, own startup: a company launched in 2012 and which makes “non-toxic” diapers (as opposed to toxic diapers?), called the Honest Co., has raised $70 million at a valuation just shy of $1 billion in preparation for an IPO.
Ridiculous? Well of course, but at least unlike Snapchat which still has zero revenue, there actually are idiots who will pay a premium to subscribe to hemp diapers, and the company does in fact have some revenue: “since launching in 2012 with its non-toxic diapers and other natural baby products, the California-based startup has grown quickly by blending its environmentally sensitive products with a social mission. Annual revenue is tracking to hit north of $150 million in 2014, or three times the revenue of 2013, according to Mr. Lee. Roughly 80% of Honest revenue is from customers who subscribe to a monthly service delivering diapers and other consumable products on a recurring basis.”

This post was published at Zero Hedge on 08/27/2014.

Get Back To Work Mr. Hollande; French Jobseekers Surge To Record High

Despite all the ‘promises’ French joblessness has risen every month since April 2011… July’s jump is the 2nd biggest sinmce April 2013 and at 3.424 million is a fresh record high. One can only hope (though good luck with that) that the new cabinet – same as the old cabinet – will turn things around. With 80% of French people believing that Hollande cannot fix the economy, we suspect things get worse before better…
French ministers are piling the pressure on Draghi to do something…
*VALLS SAYS NEW FRENCH GOVT STANDS FOR ECONOMIC CLAIRITY *VALLS ECB NEEDS TO GO FURTHER IN FIGHTING INFLATION *VALLS SAYS NEW FRENCH GOVT STANDS FOR ECONOMIC CLAIRITY *VALLS SAYS LOW INFLATION THREATENS EUROPEAN PROJECT Charts: Bloomberg

This post was published at Zero Hedge on 08/27/2014.

Art Cashin Warns Bulls: “History” Not On Their Side

Yesterday, the venerable Art Cashin had 12 simple words of wisdom for ‘traders’. Today he has a more direct warning for those watching the levitation and counting their ‘wealth effect’ gains…
“Unfortunately, history gives us a kind of muted picture of it, that if you have high volume, you get follow-through very easily. If you have low volume and you go into September, we’ve only had big carry-through a few times,”

This post was published at Zero Hedge on 08/27/2014.