Financial Times Lex: Russia is a Creditor to the World – Default Risk Non-existent

Jon

Quote of the day from Financial Times’ Lex Column that sums it all up:
“Officially, Russia is a creditor to the rest of the world. This may have been easy to forget during the last week.
Extreme volatility in the ruble, rising bond yields, and panic in its money markets: all suggest a country about due for a visit from the International Monetary Fund.  Well, the reception from President Vladimir Putin would probably be rather frosty.
Also, the net international investment position (external assets versus liabilities) is $180bn.
So – even given $120bn in external debt owed by Russian banks and companies maturing next year – what’s the problem?”

This post was published at Russia Insider

Former Russian Finance Minister: ‘We Have Entered Full-Fledged Economic Crisis’

Jon

Russia's government has pushed the country into an economic crisis by not tackling its financial problems fast enough, former finance minister Alexei Kudrin said on Monday, warning the full effects would be felt next year.
Kudrin — a darling of investors who is credited with building Russia's $170 billion worth of sovereign wealth funds — added that sanctions over Ukraine, not falling oil prices, were primarily behind the collapse of the ruble and warned that Russia risked seeing its debt downgraded to junk status in 2015.
"Today, I can say that we have entered or are entering a real, full-fledged economic crisis. Next year we will feel it clearly," the former minister told a news conference.
He has since criticized Putin's response to Western sanctions imposed following Russia's annexation of Ukraine's Crimea region and its subsequent support for loyalist fighters. But the two men are still believed to be close.

This post was published at Money News

E.U. Dream to Satisfy Gas Needs from Azerbaijan Is Absurd

Jon

Subsequent to Moscow’s abrupt cancellation of the South Stream pipeline, there has been a mad scramble on the part of the EU. And the miracle solution they have hit upon is called the Southern Gas Corridor. The hype currently being devoted to it suggests it is a clever new idea by Brussels which has snatched victory from the jaws of defeat.
I wouldn’t want anyone to go on thinking that.
The Southern Gas Corridor Project has actually been ongoing since 2003, in that lackadaisical way European projects have of consuming money without really yielding any tangible results – let’s recall, we live in an age when consultancy is a growth industry.
Different pipeline projects started off competing for what Brussels euphemistically terms its initiative to diversify its energy supplies: one of them was Nabucco, which until recently was as dead as Thomas Jefferson, although now would be a perfect opportunity for the dithering Europeans to revive it so they could talk about it for another 11 years without building anything.

This post was published at Russia Insider

Volcker lambasts Wall Street lobbying

Jon

Paul Volcker, the former Federal Reserve chairman, has lambasted the "eternal lobbying" of Wall Street after regulators granted the industry more time to comply with a rule designed to prevent them from owning hedge funds.
In a withering statement — as much an attack on his successors at the Fed as a critique of banks — Mr Volcker said: "It is striking that the world's leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries, however complicated, apparently can't manage the orderly reorganisation of their own activities in more than five years."

This post was published at Financial Times

Look For Big Rally In Junior Miners In January After Tax Loss Selling

Jon

The Holiday Season is here and a volatile 2014 is coming to a close. Be prepared to pick up quality situations during tax loss selling season and benefit off of a powerful January Effect rally.
Recently we heard the comments from Fed Chairwoman Yellen which appeared to be dovish.
Crashing oil prices and a rising US dollar will put a halt to any interest rate increases from the Fed. Weak Holiday sales and increasing unemployment in 2015 are a possibility especially as I expect layoffs in the once booming fracking sector.
Divergence Between TSX Venture and S&P500 Not Seen Since Dot Com Bubble
Equities are rallying and following tax loss selling season the TSX Venture which is hitting decade lows may experience a major bounce due to the January Effect. The January Effect often benefits small cap beaten down situations as large investors reposition for 2014.

This post was published at Gold-Eagle on December 22, 2014.

Economic Data Bonanza Set To Send Algos Spasming To Recorder Highs

Jon

With the wind down of the record 2014 trading slump now in its final days (although judging by volumes throughout the year one may have a difficult time noticing just when the holidays began and ended), the already entertaining zero-liquidity market moves are sure to provide further amusement today in the context of the US economic data bonanza on deck, which includes Durable Goods, GDP, Personal Income and Spending, Richmond Fed, UMich, and New Home Sales. Beat or miss, all of the above are guaranteed to send the S&P to higher recorder highs because in the multiple-expansion euphoria blow-off top phase nobody cares about such trivia as fundamentals or the economy, especially when Japan and Germany are about to monetize all of their gross issuance. Just remember to occasionally keep an eye on the preferred rigging correlation pairs: the USDJPY and the VIX, whose every illiquid jerk will be followed by Citadel & NYFed’s algos tic for tic.
As we enter further into the festive period, things are particularly quiet from a European perspective with most EU indices trading in the green with the exception of the FTSE MIB and IBEX who trade relatively unchanged amid a lack of pertinent newsflow. The main outlier in Europe is the Athens stock exchange which trades lower with losses of just under 2% ahead of the second round of voting in the Greek Presidential elections. Today we saw that Stavros Dimas is unable to secure the required 200 votes for a majority in the second presidential vote round, getting just 168 of the 200 votes needed. And now we await the third round of votes where the threshold will be lowered to 180. If Dimas fall short of this level then it will trigger snap elections which would favour the anti-euro far-left Syriza party.

This post was published at Zero Hedge on 12/23/2014.

Greece On The Edge After Second Failed Presidential Vote

Jon

A week after the Greek Prime Minister, Antonis Samaras, was unable to push through his nominee for president, Stavros Dimas, in a vote in parliament that needed 200 votes to pass, hours ago the second presidential vote took place and just like last week it again failed to secured the needed 200 votes, with just 168 lawmakers voting for the designated appointee. This means that in the third and final voting round next week, on December 29 – a trading day where bad news will propagate like wildfire in the absence of any market liquidity and means Kevin Henry will have to work overtime buying ETFs – New Democracy’s Samaras has to find (or bribe) another 12 votes or else Greece is facing a snap election where the anti-bailout/anti-austerity leftist Syriza party is expected to win, and set off a chain of events that may result in Greece being kicked out of the Eurozone at least if the jitters seen during the summer of 2012 are any indication.
Then again, judging by the absolute non-reaction by the market, it seems that not an algo cares any longer if Greece is or isn’t part of the Eurozone, and/or if peripheral European bond yields trade with the implied ECB monetization premium or are allowed to trade at fair value, well into double-digit yield territory.
In the meantime, the PM is starting to sweat:”I hope in the final vote for president we will avert a national catastrophe,” Greek PM Antonis Samaras told reporters in Athens today after the failed second round vote. By “national catastrophe” he, of course, means allowing the majority to express its opinion.

This post was published at Zero Hedge on 12/23/2014.

Ronald Stoeferle: Gold Outlook For 2015

Jon

What will gold do in 2015 is a question that is top of mind of many gold investors, particularly during this period of the year. We reached out to gold analyst Ronald-Peter Stoeferle, Managing Partner and fund manager at Incrementum AG in Liechtenstein, author of the In Gold We Trust reports, to get his taken on the outlook for gold for 2015. His expectations for 2015 are summarized by the 10 charts in this article.
This year was cleary a mixed bag for the precious metals. On the one hand, gold stabilized and confirmed its trading range which was formed after last year’s price crash. Another positive fact is the relative strength of the price of gold in most major currencies non-U. S. Dollar, as evidenced by comparing the first two charts below (the first chart, Euro gold, looks relatively more solid than Dollar gold). On the other hand, silver and the miners went lower and broke below their trading range. That is clearly disinflationary, and disfinlation has been the main message that the precious metals complex has signaled in the past year. That is also the baseline for gold’s outlook for 2015.

This post was published at GoldSilverWorlds on December 23, 2014 |.

The US Dollar and the Cone of Uncertainty

Jon

Currently we have an international monetary non-system. Nobody has to follow any rules. Everybody does what they consider is in their own short-term best interest. The real difficulty is: What is in their short-term interest – for example, following ultra-easy monetary policy – could well backfire somewhere. It might be not in their long-term best interest. And as the easy monetary policy influences the exchange rates, it influences other countries. Almost every country in the world is in easing mode, following the Fed, and we have absolutely no idea how it will end up. We are in absolutely unchartered territory here.
– William S. White, former Chief Economist, Bank for International Settlements, in an interview for Finanz und Wirtschaft
I visualize this process [of forecasting the future] as mapping a cone of uncertainty, a tool I use to delineate possibilities that extend out from a particular moment or event. The forecaster’s job is to define the cone in a manner that helps the decision maker exercise strategic judgment. Many factors go into delineating the cone of uncertainty, but the most important is defining its breadth, which is a measure of overall uncertainty.
Drawing a cone too narrowly is worse than drawing it too broadly. A broad cone leaves you with a lot of uncertainty, but uncertainty is a friend, for its bedfellow is opportunity – as any good underwriter knows. The cone can be narrowed in subsequent refinements. Indeed, good forecasting is always an iterative process. Defining the cone broadly at the start maximizes your capacity to generate hypotheses about outcomes and eventual responses. A cone that is too narrow, by contrast, leaves you open to avoidable unpleasant surprises. Worse, it may cause you to miss the most important opportunities on your horizon.
– Paul Saffo, technology forecaster
Saffo borrows the term ‘cone of uncertainty’ from weather forecasting. While you may not be familiar with the concept, you see it in use every time there is a hurricane forecast. The further away you get from where the hurricane actually is at the moment, the wider the ‘cone’ predicting its possible paths.
For the past two letters we’ve been looking at the global scene and trying to figure out which issues will help us outline scenarios for 2015. We finish the series today by looking at the impact of the dollar bull market on the probabilities for various 2015 developments.

This post was published at Mauldin Economics on DECEMBER 22, 2014.

23/12/2014: Eurocoin Growth Indicator: Q4 misery continues in December

Jon

Euro area lead growth indicator Eurocoin posted a rather predictable rise in December – from a miserable 0.06 in November (roughly translating into 0% growth) to a rather miserable 0.11 (roughly still translating into 0% growth).
The rise was driven by stock markets improvements and lower rate of contraction in Industrial Production, plus a gain in the European Commission-measured Business Sentiment (that roughly contrasted the deteriorating growth signalled by the PMIs). Consumer surveys continue to disappoint, but exports posted a pick up.
So where we are in growth forecast terms?

As the above shows, growth forecast is running at 0.1% real GDP expansion for Q4 2014.

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

Welcome To The Recovery: US Box Office Spend Plunges To Lowest Since 2000

Jon

While the cancellation of ‘The Interview’ wiped billions off the US Box Office take in 2014 (</sarc>), ticket sales in North America will total roughly $10.5 billion, according to The NY Times, the lowest since 2000 (after inflation). Regal Cinemas and AMX Theatres have seen profits collapse and Carmike Cinemas has plunged to a loss as major movie delays (from Pixar and Universal), “pirating” of several movies (The Expendables 3 and Annie) before their release, and studios suffering one dud after another (Warner Bros.) the 4% YoY decline – for what is ultimately an affordable luxury – suggests the gas-price-savings are going anywhere but discretionary spending (just as we noted previously).
Not a pretty picture of recovery…

This post was published at Zero Hedge on 12/22/2014.

Gold Daily and Silver Weekly Charts – Tidings of Great Joy

Jon

I am happy that I am allowed to spend another Christmas with Mary and my son Christopher. And even our little Shih Tzu dog, who is almost as shameless as a Wall Street banker in pursuit of treats.
Nothing is more precious, there is no greater gift from God that I can even imagine.
When you have nothing good to say about the foolishness and ravings of ‘very important and powerful people’, perhaps it is better to say nothing at all. They too shall pass, and be nothing.

This post was published at Jesses Crossroads Cafe on 22 DECEMBER 2014.

How Japan Bankrupted Itself – Lessons For Europe

Jon

Following the start of Abenomics in 2012, Japan moved back to the center of attention of global financial markets. After two and a half decades of economic stagnation, hopes were high that Japan would escape its long stagnation and deflation.
Plenty of economists around the globe hoped that, in so doing, Japan would show the western world, mainly the Eurozone, the way to do the same and avoid a similar long period of low growth and stagnating incomes.
Conversely, the failure of Abe’s plan for Japan’s recovery would not only be a disaster for the country of the rising sun.
It would also be very bad news for central bankers and politicians in the west as well. It would prove that Keynesian policies don’t work in a world of too much debt and shrinking populations.
To assess the probabilities of these scenarios, it is worthwhile to have a deeper look on how Japan ended up in the current economic malaise.
The erstwhile poster child Japan served globally as a role model for economic development in the 1980s. After an economic miracle following the Second World War, Japanese companies started to dominate in leading industries like machinery and equipment, automotive and consumer electronics.

This post was published at Zero Hedge on 12/22/2014.

6 Great Investment Questions To Marc Faber

Jon

In the latest episode of Ask the Expert, by Sprott Money, Dr. Marc Faber was the invitee. Below are the answers from Marc Faber on 6 excellent questions from Sprott Money readers. Subscribe for future updates at SprottMoney.com.
With the slowing world economy that has led to a slowdown in oil demand, what do you think is the long-term future of oil? Likewise, if oil prices rise again, would you recommend buying Russian oil stocks?
Marc Faber: Well, my view is that there are many explanations for the weakness in oil, including some theories that Saudi Arabia wanted to weaken Russia or the shale oil production in the US or Iran, and so forth. But my view is that the decline and sharp decline in oil prices signals a weakening global economy.
Now, in the last few days, I received many reports by brokerage firms and banks, and so forth. They all think that next year the economy in the world will be stronger than in 2014. This would not be my view. Reason A, the low yields on government bonds, that would seem to suggest to me that there are still some growth issues in the global economy, and the sharp fall in the industrial commodity prices would also suggest to me that the economy will be weaker than expected.
And I live in Asia. I can say that we’re not in a recession or in a deep recession, but there’s very little growth at the present time. In fact, I would argue that there’s hardly any growth at all. And as far as Russian oil stocks are concerned, and I think the oil price can rebound here short-term, but you might as well buy some oil drillers in the United States or oil servicing firms or oil companies. Why take a huge risk in Russian oil companies?
Currently, is it better for amateur individual investors to have some exposure to equities and bonds, or should they stay away from those markets altogether?
Marc Faber: My view is very simple. I have no clue, although I’m an investment advisor, how the world will look like in five years time. Now, maybe some forecaster knows, but I haven’t met them yet, and I’d like to meet them yet. The fact is simply, we don’t know much about the future. We even know little about the present and the past. And my advice to anyone investing is diversification. You have to own some equities. You own some gold. You own some cash and bonds, and you own some real estate. That is what you should do, because we don’t know.

This post was published at GoldSilverWorlds on December 22, 2014.

Ukraine Central Bank Conned Into Swapping Its Gold For Lead Bricks

Jon

Just when one thought the story of Ukraine and its (now non-existant) gold could not get any more surreal, it did.
As a reminder, it was about a month ago when we learned courtesy of an interview on Ukraine TV with the country’s central bank head Valeriya Gontareva, that Ukraine’s gold was virtually all gone, when she made the stunning admission that “in the vaults of the central bank there is almost no gold left. There is a small amount of gold bullion left, but it’s just 1% of reserves.”


This post was published at Zero Hedge on 12/22/2014.

Whoops! Existing Home Sales Drop Well Below Forecast

Jon

Of course, this was not unexpected for anyone who reads my work…
The seasonally manipulated adjusted rate fell to 4.93 million – well below the expected rate of 5.2 million. Note: this is a statistically calculated annualized rate and bears no resemblance to the actual sales rate. As we know from an earlier post, SoCal home sales in November plunged 19%. Inventory is climbing quickly, which is consistent with all of the new ‘for sale’ and ‘for rent’ listings all over the metro-Denver area.
More later, but suffice it so say that my homebuilder short-sell reports are very ripe and ready: Homebuilder Reports.

This post was published at Investment Research Dynamics on December 22, 2014.

Don’t Tell Germany Draghi Is About To Monetize 90% Of Bond Issuance

Jon

The next time anyone is stupid enough to mention monetary policy “normalization”, either have them read this:
The Bank of Japan’s expansion of record stimulus today may see it buy every new bond the government issues. The BOJ said it plans to buy 8 trillion to 12 trillion yen ($108 billion) of Japanese government bonds per month under stepped-up stimulus it announced today. That gives Governor Haruhiko Kuroda leeway to soak up the 10 trillion yen in new bonds that the Ministry of Finance sells in the market each month.
Translated: the BOJ will monetize 100% of all Japanese debt issuance (source).
… And this:

This post was published at Zero Hedge on 12/22/2014.

Kazakhstan Prepares For $40 Oil, Gary Schilling Says “Oil Going To $20″

Jon

“People should not be worried,” explained Kazakhstan President Nursultan Nazarbayev in a TV address over the weekend,“we have a plan in place if oil prices are $40 per barrel.” Kazakhstan, the second largest ex-Soviet oil producer after Russia, explains “there are reserves which could support people, preventing living conditions from worsening.” However, if A. Gary Schilling’s reality check of $20 oil being possible comes to fruition, as he explains, what matters are marginal costs – the expense of retrieving oil once the holes have been drilled and pipelines laid. That number is more like $10 to $20 a barrel in the Persian Gulf… We wonder who has a plan for that?
The Kazakh President says “don’t worry”, as Reuters reports…

This post was published at Zero Hedge on 12/22/2014.