22/9/2014: Where TLTROs dare to go?..

Last week I wrote about the disappointing nature of the first round of TLTROs by the ECB (Now, some more evidence that TLTROs are at best replacing / swapping liquidity in LTROs maturities without materially changing the nature of the banks assets holdings. Remember, the objective of TLTROs is to inject funds into corporate lending, not sustain or increase flows of funds into sovereign debt markets… which means sovereign yields should not be falling in connection to TLTROs. So guess what’s happening?

This post was published at True Economics on Monday, September 22, 2014.

Fitch Warns on What Happens to the US as Dollar’s ‘Pre-Eminent Reserve Currency Status’ Erodes

It’s very risky for an American credit ratings agency to downgrade the US Government.
Standard & Poor’s found out when it stripped the US off its AAA rating in 2011 over the debt-ceiling charade. The Department of Justice then sued S&P over its role in the financial crisis, i.e. for slapping AAA-ratings on toxic securities to pocket fatter fees from issuers. But the other ratings agencies did the same thing and have not been hounded. So S&P claimed that the ‘impermissibly selective, punitive and meritless’ lawsuit was ‘in retaliation’ for the downgrade.
Though the Government denied the retaliation angle, it was a lesson no credit ratings agency within the long and sinewy arm of the Government would ever forget. But now Fitch is inching gingerly toward that abyss. While it affirmed (text) the US at AAA, Outlook Stable, it threw in some potentially devastating caveats.
What drives America’s dubious AAA-rating? ‘Unparalleled financing flexibility as the issuer of the world’s pre-eminent reserve currency….’
So endowed, ‘the US rating can tolerate a higher level of public debt than other ‘AAA’ sovereigns.’ The ‘threshold’ for the US is a gross national debt of 110% of GDP, the highest threshold of any country ‘owing to its exceptional financing flexibility.’ But if the US hits that 110%, it would be ‘incompatible with ‘AAA.”
Other factors also contribute to that ‘exceptional financing flexibility,’ including America’s vast and liquid capital markets, its ‘large, rich, and diverse’ economy, ‘one of the most productive, dynamic, and technologically advanced in the world.’ Nevertheless, growth in that miracle economy in 2014 is going to be a ‘sluggish’ 2%, just above stall speed. And Fitch sees the medium-term growth potential at a languid 2.2%.

This post was published at Wolf Street by Wolf Richter ‘ September 22, 2014.

Philly Fed’s Hawkish President Charles Plosser To Retire In March 2015

Onehawk down, and just as rates are supposedly set to begin rising. Smart.
Full press release:
Philadelphia Fed President Plosser to Retire on March 1, 2015 Charles I. Plosser, president and chief executive officer of the Federal Reserve Bank of Philadelphia, today announced that he will retire, effective March 1, 2015. President Plosser has served as the 10th president of the Philadelphia Fed since August 1, 2006.
“For more than eight years, I have had the honor to work alongside many talented colleagues here at our Bank and throughout the Federal Reserve System during an extraordinary period in this nation’s economic history. After more than three decades of economic research and teaching, this has been a unique opportunity and privilege to serve the nation,” said Plosser.
“Charles Plosser has been an insightful and dedicated leader and colleague in the Federal Reserve System,” said Federal Reserve Chair Janet Yellen. “I am particularly grateful for his vital contributions to the work of the subcommittee on communications. My colleagues and I will miss his keen insights, deep analysis, and good humor.”

This post was published at Zero Hedge on 09/22/2014.

Obama Defends Goldman Sachs & Derivatives Demand EU Include them in Free Trade and Cannot Regulate US Banks

Obama is defending Goldman Sachs & of NY Bankers in their bid to include Derivatives in the free trade agreement with Europe and to ensure they cannot be regulated by Europe. Obama insists, at the bank’s request, that subject US banks to EU regulation will complicate the regulatory landscape unnecessarily. The banks are lobbying hard for that position from the White House. Obama wants derivatives IN EVERY MARKETglobally to be exempt from foreign regulators just in time for the next bubble. Obama argues they are hedges against exchange rate fluctuations, but derivatives also bet on purchases of real estate and mortgages, commodities, food, their sales or purchases in the future. This includes the toxic bombs that wiped out so many banks – mortgage derivatives, including the so-called CDO’s (mortgage insurance). The EU is now putting pressure on the US by threatening to exclude any discussions on financial services altogether from the trade agreement unless Washington agrees to Brussels’ demands to put regulation on the table. The EU is arguing that the existing transatlantic dialogue between watchdog regulators and other international venues is not entirely adequate for regulatory matters. Indeed, the US has far too many regulators compared to just one in Europe including London. The mortgaged backed securities required approval by SEC, CFTC, Fed, Banking regulators, etc. at least 7 approvals of US regulators but they all follow each other anyhow, Huge waste of resources. The EU is correct on this debate.

This post was published at Armstrong Economics on September 22, 2014.

This Is How Italy “Fixes” Its Unsustainable Debt Problem

Earlier today, Morgan Stanley released a report titled “Debtflation – One Shock Away?”, which we will review more in depth shortly, but here is the gist: “Because public (and private) sector leverage is very high in parts of [Europe], this unstable situation is better described as debtflation. With bond yields already very low, when inflation is so subdued the challenge for debt sustainability is whether real growth is enough to cushion any shock. Several euro area economies look vulnerable, we think.”
Of these, Italy, which recently just returned into economic contraction and hence, a triple-dip recession, is the most vulnerable. To wit:
Italy – debt stock problem… We expect a primary budget surplus of about 2.3% of GDP this year. Yet, with nominal GDP growth close to zero, this would not be enough to stabilise the debt trajectory. What’s more, 2014 debt/GDP and interest expenses/GDP – which we estimate at over 135% and 5.3%, respectively – are so high that a descending debt trajectory would only be achieved with a primary budget surplus higher than 5% of GDP, which should be maintained over time, thus requiring a permanent austerity drive.
…requiring an ambitious combination of real growth and inflation: Or, alternatively, government debt could come down, assuming an unchanged primary budget surplus (2.3% of GDP) as in the exercise above, if nominal growth were to accelerate to at least 3%Y. Yet this would require substantially higher inflation, which doesn’t seem to be very likely in the near term, or stronger real growth – which is unlikely to materialise too, unless a long period of political stability and structural reforms were to come through.

This post was published at Zero Hedge on 09/22/2014.

China Moves To Dominate Gold Market With Physical Exchange

Shanghai Gold Exchange International Board China is slowly moving to dominate the global gold market and it is important to join the dots regarding a few key recent developments in China relating to gold.
When the International Board of the Shanghai Gold Exchange (SGE) was launched last Thursday September 18 during an evening trading session, it was notable that the first transactions were put through by a diverse group comprising HSBC, MKS (Switzerland), and the Chinese banks, ICBC, Bank of China and Bank of Communications.
MKS is the Geneva headquartered precious metals trading group that also owns the large PAMP refinery company in Switzerland.

There are reportedly 40 international participants signed up to trade on the SGE International Board (SGEI), but the SGE hasn’t specifically confirmed the identities of all participants.
Like the domestic SGE which counts precious metals refineries as members, the SGEI will have a diverse group of trading participants including a number of international refineries as well as bullion banks and trading houses.
Precious metals refineries Metalor Technologies and Heraeus have confirmed that they will be participants and along with MKS, this represents three of the largest gold refineries in the world.

This post was published at Gold Core on 22 September 2014.

G-20 Post Mortem: Hopes, Fears, & Dashed Exepctations

We, like Bloomberg’s Richard Breslow, were bemused this weekend by the communiques from the wisest men in the room at the G-20 meeting. On one side of their mouths they warned of “excessive risk-taking,” in markets noting that there were “mounting economic risks” also. On the other hand, stories continue to print of US equity strength implying optimism over global growth – despite the ongoing collapse in consensus GDP expectations. However, away from this hope and fear, it was the almost coordinated responses of the PBOC (Chinese Finmin Lou Jiwei signaling not to get carried away with stimulus expectations), ECB (Visco saying may not need additional QE step since EUR had dropped ‘enough’), and finally the BOJ (Iwata saying Abenomics misunderstood, USDJPY 90-100 ‘fair); all dashing market expectations of a smooth hand over from a feckless Fed to a free-printing rest-of-the-world. Stocks (and carry) responded by selling off.
As Bloomberg’s Richard Breslow notes,
I was amused/bemused this weekend when I saw two stories literally next to each other on my newsfeed.
FEARS – The first said ‘global finance chiefs said to warn of mounting economic risks.’
HOPE – The next story, same dateline: U. S. stocks increase for week over optimism on economic growth.

This post was published at Zero Hedge on 09/22/2014.

Two Estimations of Chinese Gold Demand

I found it interesting that these two estimations of Chinese gold demand arrive at similar answers from two different methods and assuming two different start dates. Before anyone asks, Koos Jansen has addressed the notion of ’round trips’ of gold on the Shanghai Exchange in some detail. It is not the same sort of bullion game that is the hall mark of the Comex. The first chart is from the data wrangler Nick Laird at Sharelynx. The second chart is from GoldSilver.com. I don’t think anyone knows the exact amount of physical gold that China and the BRICS are absorbing. And how much unencumbered gold remains in many of the Western vaults either.

This post was published at Jesses Crossroads Cafe on 21 SEPTEMBER 2014.

Despite ‘Record’ Opening Weekend, Goldman Fears “The iPhone Effect” On Retail Sales May Disappoint

The exuberant images this weekend of lines-around-the-block at Apple stores were met with triumphant flashing red headlines this morning when Apple announced the sale of more than 10 million iPhone 6 and 6 Plus models (more than expected). Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. However, Goldman notes, with the launch of the new iPhone 6/6 this month, estimates (based on historical data) of a 0.1 to 0.7ppt boost to September core retail sales is highly uncertain due to seasonal adjustments that have been highly erratic, and could easily take a big bite out of the Apple effect.
Typically, new product launches do not move the needle on aggregate US economic data. Apple’s iPhone has been the most notable exception, with past launches occasionally having a substantial effect on core retail sales. In particular, iPhone sales show up in two categories of the report: electronics stores (representing in-store sales) and “nonstore retailers” (representing online sales). Exhibit 1 shows the behavior of these two categories of retail sales during the release month for the iPhone 4S, iPhone 5, and iPhone 5S/5C, both on an initial print (i.e. as-reported) basis, as well as the final revised estimates. The iPhone 4S and 5 launches showed up clearly, particularly in the initial print data. The iPhone 5S/5C launch did not appear to boost retail sales as notably, perhaps due to (1) the lack of a preorder period for the 5S, and (2) the fact that the 5C was not as popular as initially hoped, with many retailer orders heading into inventory.

This post was published at Zero Hedge on 09/22/2014.

Albert Edwards Presents “The Most Important Chart For Investors”

Which incidentally has nothing to do with stocks or bonds, and everything to do with all-important FX (which just happens to drive all correlation and risk pairs around the globe thanks to the far greater embedded leverage in FX, and is why all “modern” traders focus almost entirely on the USDJPY and EURUSD).
Specifically, as SocGen’s Albert Edwards notes “we show on the front page chart what I believe to be the key chart investors should be focusing on at present. It shows the yen breaking down against the US dollar. This may be more than just a strong dollar story on the back of Fed tightening however, as it seems the yen has now also broken key support levels against the euro. This is a weak yen story. Though there are good fundamental explanations for recent dollar strength vis- -vis both the yen and the euro, often commentators like to find a fundamental story to fit market events even when price movements have occurred without any clear fundamental explanation ? for we teenage scribblers (as ex-UK Chancellor Nigel Lawson dismissively called us) all have to fill those column inches of commentary.”

This post was published at Zero Hedge on 09/22/2014.

Mario Draghi’s Lies Annotated, And A Brief Glimpse At The Truth

UK supermarket operator Tesco has suspended four executives after discovering a $408 million “serious accounting issue” in its latest financial statements. In a reflection of Walgreen’s earlier ‘forecassting errors’, it appears everyone’s optimism is now costing them their jobs as Tesco admits the executives were “early booking commercial income and delayed booking costs.” And that – in one simple sentence – is the optimistic, we-are-sure-the-income-will-be-there, way to “solidly beat” expectations quarter-after-quarter.
As WSJ reports,
Tesco suspended four senior executives and called in outside auditors and legal counsel to investigate a 250 million ($408.8 million) overstatement of the U. K. supermarket operator’s forecast first-half profit. Tesco’s newly installed chief executive, Dave Lewis, said on Monday that the company has uncovered a “serious” accounting issue.

This post was published at Zero Hedge on 09/22/2014.

Scam Alert: Hospitals All Over America Are Wildly Inflating Medical Bills

The next time you visit a hospital, it is your wallet that may end up hurting the most. All over the United States, it has become common practice for hospitals to wildly inflate medical bills. For example, it has been reported that some hospitals are charging up to 30 dollars for a single aspirin pill. And as you will see below, some victims report being billed tens of thousands of dollars for a non-surgical hospital visit that lasts only a few hours. When something is seriously wrong with us, most of us never stop to ask our health professionals how much it will cost to actually treat us. In that moment, we are desperate and we just want someone to help us. Many doctors and hospitals take full advantage of this by billing their “customers” as much as they feel they can possible get away with. It is a legal scam that is bilking ordinary Americans out of billions of dollars every single year.
Over the weekend, the New York Times reported on one case that is a perfect example of the outrageous medical billing that I am talking about…
Before his three-hour neck surgery for herniated disks in December, Peter Drier, 37, signed a pile of consent forms. A bank technology manager who had researched his insurance coverage, Mr. Drier was prepared when the bills started arriving: $56,000 from Lenox Hill Hospital in Manhattan, $4,300 from the anesthesiologist and even $133,000 from his orthopedist, who he knew would accept a fraction of that fee.
He was blindsided, though, by a bill of about$117,000 from an ‘assistant surgeon,’ a Queens-based neurosurgeon whom Mr. Drier did not recall meeting.
‘I thought I understood the risks,’ Mr. Drier, who lives in New York City, said later. ‘But this was just so wrong – I had no choice and no negotiating power.’

This post was published at The Economic Collapse Blog on September 21st, 2014.

David Morgan: US Dollar is the Last Stop Before Gold & Silver Spike by Greg Hunter6 hours ago2,805 views

The following video was published by Greg Hunter on Sep 21, 2014
On the recent strength of the U. S. dollar, David Morgan of Silver-Investor.com, says, ‘John Exter’s upside down pyramid explains it very well. The derivative markets blow up and you go down the pyramid of liquidity. The step above the run to gold is the U. S. dollar. Most people who are under educated about money think if you have physical dollars under your mattress, you are in the safest position you could possibly be in. If you have all of your savings in physical greenback, you don’t have to worry about a bank failure. That is the most important step until that doesn’t work. When that doesn’t work, faith in the dollar is lost or being lost, then where do you go? The answer is you go to money that has lasted for 5,000 years. So, to see the dollar have all this strength and look good, that’s just the step before you go to the last step, which is a run to gold. So, it (the strength of the dollar) doesn’t surprise me. It’s part of the process . . . and the run to the dollar is a precursor that is absolutely necessary before the next step down the pyramid. . . . This is the big picture, and I see how things narrow down and why precious metals are so important in today’s financial system.’

US Equity Futures Slide Under 2000, Recover Losses After USDJPY Tractor Beam Reactivated

While some were wondering if last night’s sudden, commodity-liquidation driven selloff would last, most were not, expecting that the perfectly predictable levitation in the USDJPY around a round “tractor beam” number would provide a floor under the market . Sure enough, starting around midnight eastern, the USDJPY BTFDers emerged, oblivious to comments from former BOJ deputy governor Iwata who late last night said the obvious, and what we have been saying since January 2013, namely that a weak yen puts Japan at recession risk, and that a USDJPY in the 90-100 range reflects Japan fundamentals. And, as expected, the 109 level is where the algos have hone in today as a strange FX attractor, which also means that ES has reverse sharper overnight losses and was down just 7 points at last check even as the poundage in the commodity sector continues over rising fears of a sharp Chinese slowdown driven by its imploding housing sector (most recently observed here) without an offsetting stimulus program, following several comments by high-ranked Chinese individuals who poured cold water on any hopes of an imminent Chinese mega-QE or even modest rate cut.
And speaking of pouring cold water on easing plans, the ECB did just that, when several of its governing council members, but most notably Ignazio Visco, said that the ECB may not do further easing after all because it had managed to punk the market once again, and the EURUSD is low enough to where the whole point of QE is now moot. In other words, the market once again discounted action by the ECB… which now will never come. It remains to be seen if the central bank FX traders (which as we now know are openly trading via the CME) will allow the EURUSD to return to its pre “discounting” levels as the ECB returns to full “jawbone Off” mode.
European, Asian stocks fall with oil, metals after China declines to make policy changes in response to slower growth. Miners among largest underperformers, iron ore prices lower. U. S. equity index futures decline. Yields on 10-year U. K. gilts, German bunds fall. Tesco leads FTSE 100 declines after saying it overstated 1H profit by GBP250m.

This post was published at Zero Hedge on 09/22/2014.

China crisis fear sends stocks and commodities lower

Fears that China may be prepared to accept lower growth this year sent Asian stocks tumbling while Western futures also fell along with commodities like oil, gold and silver hit hard.
Chinese finance minister Lou Jiwei said China faces ‘downward pressure’ and reiterated that there won’t be major changes in policy in response to individual economic indicators.
Autumn arrives
Group of 20 finance chiefs and central bankers meeting at the weekend said low interest rates could lead to a potential increase in financial-market risk, as major economies rely on monetary stimulus to bolster uneven growth. US housing data is due today.

This post was published at Arabian Money on 22 September 2014.

This Country Will Get Worse Before It Gets Better

This Country Will Get Worse Before It Gets Better Scotland voted to stay part of Britain …

Even so, we’re considering a campaign to free Maryland (about which, more anon).
We are in Uruguay giving a speech to a group of Argentine investors. What can we tell them that they don’t already know? They’ve seen it all.
Yesterday’s edition of El Clarn newspaper reported that the Argentine peso had dropped past the 15-to-the-dollar level for the first time. When we first came to Argentina – it must have been in about 2005 – we recall getting only 5 pesos per dollar.
‘No one knows what the annual rate of inflation is,’ says a friend. ‘Most think it is about 40%.’ Based on that alone, it should be obvious why the peso is dropping – to everyone but Argentina’s 42-year-old minister of the economy, Axel Kicillof, that is. In loose translation from El Clarn:
‘Kicillof accused the US of having pushed the peso down. ‘Oddly, [US ambassador] Sullivan used the word ‘default’ [to describe Argentina’s failure to make the required payment on its foreign debt] when everyone knows it was selective… and then the dollar goes up and gives the impression of a general panic.
‘Contrary to the opinion of the market,’ Kicillof continued, ‘there is no economic or financial reason for the peso to trade at 15 to the dollar.’

This post was published at Acting-Man on September 22, 2014.

Death Knell for the Bull Market?

With money velocity collapsing and ominous divergences developing in both the NYSE Advance/Decline line and the New Highs/New Lows summation, U. S. stocks closed at an all-time high last week. If this were not disconcerting enough, the Hindenburg Omen, which signals an increased probability of a stock market crash, flashed red on Friday. There was also this unequivocal pronouncement from the Elliott Wave Theorist after the Dow Industrials came within a single point last week of fulfilling their long-term rally target at 17280: ‘Next week, the U. S. stock averages should begin their biggest decline ever.’ As for your editor, Rick’s Picks has been drum-rolling a key ‘Hidden Pivot’ target at 2028 in the S&P 500 Index that has been 27 years in coming. On Friday, the index hit a record 2019.

Is a major top at hand? It is often said that bells do not ring to signal the end of a bull market. But if the broad averages were in fact to plummet in the weeks ahead, never forget that bells did indeed ring. Of course, permabulls and Wall Street managers charged with throwing Other People’s Money at stocks will not likely have noticed, so intent have they been on headlines proclaiming the soundness of America’s alleged economic recovery. Over the weekend, one such story that would have goosed their confidence to giddy new heights concerned the recovery of home prices in the exurbs. To the OPM bozos, nothing says ‘recovery’ like renewed growth in subprime mortgage debt.

This post was published at Rick Ackerman BY RICK ACKERMAN ON SEPTEMBER 22, 2014.

America Has its Own Growing Secession Movement

Watching the results of Scotland’s secession gambit was quite a ride, if not a little disappointing in the end. It would have been fantastic to see that proud nation independent once again. I suppose it’s not to be, at least for now. While Downing Street breathes a sigh of relief, perhaps they should reexamine the demographics of the voting results. They certainly don’t bode well for the future of the United Kingdom.
For starters, the growth of the independence movement was quite impressive. From 2011 until the day of the vote, there were quite a few polls taken on the matter. While there were many swings from month to month, support for independence probably averaged around 30 percent until 2013. From 2014 on, it slowly but consistently climbed into the mid 40’s. So who was responsible for this growing popularity?
Mainly the young and the poor, who are increasingly finding themselves in the same category as time goes on. 73 percent of those over 65 voted against secession, after fearing for the state of their pensions should Scotland break away. It’s very likely that the oldest generation is the only thing keeping the ‘U’ in the U. K.
The writing is on the wall, as it is in most countries. It seems that younger people don’t like being ruled from far away elites who don’t represent them, culturally or politically. As the previous generation dies off, they will slowly become the majority. This burgeoning urge to break nations down can be seen across the globe, and is a natural course of history. Of course, the United States is no exception.

This post was published at The Daily Sheeple on September 21st, 2014.

Liquidations Continue: Stocks, Dollar Slide, Precious Metals Pounded In Asia Trading

Markets are very active in the early Asian trading session (following the G-20-’s warnings over excess risk-taking). Precious metal liquidations continue with silver bearing the brunt (back below pre-Lehman levels) and gold down modestly. Stocks from China to US are all down notably too. The USD is weakening as EUR strengthens on the back of ECB comments about the possibility of no more stimulus and chatter that the PBOC may be selling USDs. Treasury yields are down (having retraced all FOMC losses). Iron Ore futures in Singapore just hit a record low below $80.
Treasuries have recovered all post-FOMC losses…

This post was published at Zero Hedge on 09/21/2014.