9/9/2014: Russian Economy Briefing for IRBA

Jon

Economic growth in Russia was running at 0.8% y/y in Q2 2014 versus 0.9% y/y in Q1 2014.
At the same time, GDP shrank 0.2% y/y in July 2014 and 0% y/y in August 2014.
Taken against the consensus forecast for growth at 0.5% for the full year 2014, this suggests geo-political risks-induced slowdown in the economy of some 0.3-0.4% to-date.
Russia’s economic outlook for 2014 and 2015-2015 continues to trend down, driven by two core factors:
Geopolitical risks of the Ukrainian conflict, and Structural weaknesses in the economy. The first factor is responsible for the expected actual output growth falling below down-trending potential output growth in 2014 and 2015.
The second factor is driving down potential output growth in 2015-2016 and beyond.
How dramatic were the growth forecasts revisions so far?
Take IMF: IMF is about to publish its October World Economic Outlook forecasts revisions.
In October 2013, IMF forecast real GDP growth in Russia to run at 3.0% in 2014, 3.5% in 2015 and 3.5% in 2016. So 3.5% average over 2015-2016.
In April 2014, IMF forecasts were running at 1.33% in 2014, 2.3% in 2015 and 2.5% in 2016, respectively. 2015-2016 average of 2.4% down 1.1 ppt on previous.

This post was published at True Economics on September 29, 2014.

Emerging Market Currencies Under Pressure

Jon

If one just looks at the Major Currency pairs and sees the Dollar a bit weaker this morning, it is very easy to overlook at what has been happening in some of the Emerging Market currencies. It goes back to that same interest rate differential and the fact that there is concern about slowing global growth, especially in some of these emerging markets. I should also note that there has been a large carry trade involved here as well.
I want to post a chart of the Brazilian Real for the benefit of grain traders and hog traders.
Please note that the currency just made a 6 year low against the US Dollar. Brazilian grain and Brazilian pork are dirt cheap on the global markets compared to US grains and US pork. Most US based grain traders have been in the past, and remain oblivious to such things.

This post was published at Trader Dan Norcini on September 29, 2014.

Spain Manufacturers Warn of Another Slowdown; Consumption Recovery Ends, Retail Sales Contract, Price Deflation Sets In

Jon

The alleged recovery in Spain is already over. Retail sales are down month-over-month and year-over-year in July. August and September are both projected to be weak.
Vial translation from El Economista, Manufacturers and Retailers Warn of Another Consumption Slowdown.
After a slight recovery in the first months of the year, stagnation set in since June, according to almost all employers and associations of producers and distributors. The retail index INE already pointed to stagnation in June and a drop of 0.5% in July from a year earlier.
Although the decline in July from the previous month is a somewhat lower 0.2%, the situation appears to be worsening. August data will be released this week and forecast for both August and September are not positive.

This post was published at Global Economic Analysis on September 29, 2014.

The Last Time Traders Were This Short 2Y Notes, Rates Collapsed

Jon

As rates fell last week, speculators in 2Y Treasury Notes added aggressively to their short positions. Positioning in 2Y Notes is now at its most short since mid-2007 (as 10Y Bond positioning surged to its most long in over a year), and if history is any guide to what happens next, rates are set to tumble.
The last time 2Y Note speculators were this short was mid-2007 and rates utterly collapsed soon after…

This post was published at Zero Hedge on 09/29/2014.

The Goldman Tapes And Why The Delusion Of Macro-Prudential Regulation Means The Next Crash Is Nigh

Jon

There is nothing like the release of secret tape recordings to clarify an inconclusive debate. I recall that happening with Nixon back in the day. Even as a Washington apprentice I could see that he was a ruthless, power hungry abuser of his office, but much of official Washington just denied it. Then came the tapes. Soon there was no doubt. In short order Nixon was gone.
So now comes the Goldman tapes – -46 hours of recordings by an embedded New York Fed regulator at Goldman Sachs who got fired for attempting to, well, regulate. Would that the Carmen Segarra affair generates a Nixonian result – -that is, exposure that ‘regulatory capture’ is an endemic, potent and inextricable evil that can’t be remediated in situ.
Never mind that what Ms. Segarra was attempting to regulate – whether Goldman had a conflict of interest policy with respect to its M&A clients – -was actually none of the state’s business in the first place. If in the instant case GS was giving squinty eyed advise to its client, El Paso Corporation, because it owned a $4 billion position in the other party to the transaction, Kinder Morgan, so be it. Either the conflict was harmless or eventually Goldman’s M&A business would have been punished by the marketplace – – even stupid executives and boards wouldn’t pay huge fees to be taken to the cleaners for long.

This post was published at David Stockmans Contra Corner on September 29, 2014.

Will Senators Rand Paul and Elizabeth Warren Unite to Finally ‘Audit the Fed’?

Jon

I finally had a chance to listen to the hour long interview of former bank examiner and whistleblower, Carmen Segarra, with ‘This American Life.’ In the event you haven’t taken the time to listen for yourself, I can’t emphasize enough how important it is that you do.
Whether you listen to it yourself or not, I think it’s worthwhile to share what I believe are the most important takeaways from the ‘Goldman Tapes,’ since you cannot solve a problem unless you understand it clearly at its core.
First, a little background. Carmen Segarra is the woman who worked at the Federal Reserve Bank of New York as a bank examiner. She was assigned specifically to Goldman Sachs, and was ultimately fired for asking too many questions. These employees are positioned within certain banks in order to oversee them and alert their bosses about any unscrupulous activities. At least that is what is claimed.
The most incredible thing you realize from Segarra’s account of her brief stint at the Fed, is that when push came to shove and non-compliance issues were revealed, her bosses had no backbone whatsoever and in fact scrambled to protect the banks and coverup their malfeasance. Incredibly, this was still business as usual just a couple of years after the banks destroyed the global economy, ripped apart the rule of law, and demanded and received trillions in taxpayer backstops and bailouts.

This post was published at Liberty Blitzkrieg on Monday Sep 29, 2014.

China Housing Bubble Bursts: Q3 Land Sales Crater 50%

Jon

China may be doing everything in its power to divert attention from the simple fact that its housing bubble, the largest in the world in terms of both assets comprising it as well as divergence from fair value, has burst. But while there is no clear threshold of what constitutes a bursting bubble when it comes to housing, the latest data out of Soufun, China’s largest real-estate website, which said that land sales have dropped a massive 22% to 1.7 trillion Yuan in 2014 so far, is likely as clear an indication as any that Beijing is about to panic.

This post was published at Zero Hedge on 09/29/2014.

Smoking Gun Evidence That The New York Fed Serves The Interests Of Goldman Sachs

Jon

For years, many people have suspected that the New York Fed is more or less controlled by the “too big to fail” banks. Well, now we have smoking gun evidence that this is indeed the case. A very brave lawyer named Carmen Segarra made a series of audio recordings while she was working for the New York Fed. The 46 hours of meetings and conversations that she recorded are being called “the Ray Rice video for the financial sector” because of the explosive content that they contain. What these recordings reveal are regulators that are deeply afraid to do anything that may harm or embarrass Goldman Sachs. And it is quite understandable why Segarra’s colleagues at the New York Fed would feel this way. As a recent Bloomberg article explained, it has become “common practice” for regulators to leave “their government jobs for much higher paying jobs at the very banks they were once meant to regulate.” If you think that there is going to be a cushy, high paying banking job for you at the end of the rainbow, you are unlikely to do anything that will mess that up.

This post was published at The Economic Collapse Blog on September 28th, 2014.

Catalonian Secession, and the Approaching Spanish Civil War

Jon

Nestled along the coast of Spain, is the ancient city of Barcelona and the surrounding countryside that make up the state of Catalonia. Within its borders, lives an old and storied people, with their own language, culture, and even its own parliament separate from the legislative bodies in Madrid. They are by far, one of the most Independent regions within the European Union. Don’t tell that to Spain’s central government though. As far as they’re concerned, Catalonia is just another vassal state with a tax base.
Since the early 20th century, Catalonia has seen a massive resurgence of its nationalist movement. Despite being brutally suppressed by the Franco regime, the movement made a comeback in the late 70’s and 80’s, and managed to secure several autonomous rights in the process.
Fast forward to the present day, and now we see the secession sentiments stronger than ever, as the people of Catalonia try to separate themselves from the nation of Spain. And they should. Spain, like many of the European Union’s southern members, is a total basket-case with an enormous unemployment rate, a large class of welfare dependent citizens, and debt levels so high it would make a casino blush.

This post was published at The Daily Sheeple on September 29th, 2014.

Can The US Economy Handle A Meaningful Downturn In Financial Asset Prices?

Jon

From ConvergEx‘ Nicholas Colas
Financial asset price volatility gets a bum rap. Everything in moderation, yes… But the unusually quiescent capital market behavior of the last few years isn’t really doing anyone any favors over the long run. Today’s note reviews the benefits of a more volatile bond and stock market: everything from the possibility for truly skilled fund managers to make outsized returns to a very necessary reset of investor and corporate behavior. As bond and stock markets get twitchier – and that process is already underway – just remember that there are many silver linings in the storm clouds that are gathering.
For much of the history of modern medicine, the function of the human appendix has been a bit of a mystery and common wisdom held that it was essentially useless. About the only thing doctors knew was that it could become infected and that its removal caused no adverse health consequences. Medical professionals have been performing appendectomies since the 1730s, and one brave Soviet doctor managed to remove his own infected appendix in the 1960s while stranded on a scientific outpost in Antarctica. Don’t try that one at home, kids.
More recently, the appendix has gotten a reprieve and some researchers believe it may have several useful functions after all. As it turns out, that little sac in your abdomen acts as a back-up supply for the bacteria your body needs to stay healthy. It also serves a function in prenatal development, helping to balance hormone levels. Clever surgeons now use the appendix to reconstruct internal organs damaged by cancer or infection. In short, the appendix does have its uses – plenty of them, actually.
For capital markets, asset price volatility is much like the human appendix. The rally in both stock and bond markets – especially in the U. S. – has come with little in the way of wayward price action. It has been a ‘Set it and forget it’ move for stocks for three years, with little in the way of classic 10% pullbacks to shake out weaker hands. The rally in bonds, thought unlikely at the beginning of the year, has been similarly uneventful. It is as if investors have extracted the seemingly unnecessary appendix of volatility and, with the market seemingly unaffected, decided it has no real function.

This post was published at Zero Hedge on 09/29/2014.

Atlas is Getting Tired of Holding up the World Economy

Jon

It is becoming a familiar story of global uprisings and discontent outside the USA while steady economic growth in the USA remains the only thing holding up the world economy. Socialism is dead just as communism. The idea that governments can manipulate the economy to smooth out the business cycle has been a disaster. Even Keynes before he died realized he was wrong and said he hoped Adam Smith’s Invisible Hand would save Britain. He said: ‘I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.’
Indeed, Paul Volcker, former Chairman of the Fed even stated in his 1979 Rediscovery of the Business Cycle:
‘The Rediscovery of the Business Cycle – is a sign of the times. Not much more than a decade ago, in what now seems a more innocent age, the ‘New Economics’ had become orthodoxy. Its basic tenet, repeated in similar words in speech after speech, in article after article, was described by one of its leaders as ‘the conviction that business cycles were not inevitable, that government policy could and should keep the economy close to a path of steady real growth at a constant target rate of unemployment.’

This post was published at Armstrong Economics on September 29, 2014.

The Workings Of The Shanghai International Gold Exchange, Part One

Jon

‘This event is a major milestone in China’s opening of its financial market to foreign investors. The Shanghai International Gold Exchange will bolster China’s gold market toward greater trading volume and further highlight the price discovery function of the gold market’, Zhou Xiaochuan, governor of the People’s Bank Of China, at the opening ceremony of the Shanghai International Gold Exchange September 18, 2014.
An Introduction To The Shanghai International Gold Exchange As most of you have probably noticed last week the Shanghai Gold Exchange (SGE) launched it’s subsidiary the Shanghai International Gold Exchange (SGEI) located in the Shanghai Free Trade Zone. Much has been written in recent days about the SGEI, but how does the new gold exchange actually operate? How can you and I participate in the Chinese gold market and how does this affect the global gold market? Well, you and I can trade physical gold in renminbi through an exchange in China from now on, how this will affect price discovery (of gold) we’ll see in the coming months and years.
I’ve written many posts on the structure of the Chinese domestic gold market, with the SGE at its core, and how gold trade between China mainland and foreign countries is regulated. Has all this suddenly changed now the Chinese gold market is fully opened to the rest of the world? No, the structure of the Chinese domestic gold market and Chinese gold trade policy has not been altered. The SGE and SGEI are technically separate exchanges. This is because a Free Trade Zone (FTZ) in terms of trade is a separate country from China mainland. FTZ’s enjoy different trade rules; one can not freely import goods from a FTZ into the mainland. Hence, gold imported into a FTZ is not imported into China’s domestic gold market. However, there is a fashion conceived that links the Chinese with the international gold market.

This post was published at Bullion Star on 25-09-2014.

Small Investors Flash Warning Sign

Jon

Stories like these – ‘Return of the daytrader: can you earn a living by copying other investors?’ which the Telegraph ran on Saturday – are priceless:
It promises an irresistible combination of wealth and independence. All you need is a computer and an internet connection – and then you can earn a fortune from the comfort of your home.
This is the lure of financial trading for profit. As the popular BBC programme Millions by the Minute has shown, the dream seems to be gaining hold. It appeals to parents who hope to be able to squeeze in some profitable trading between school runs. And it is equally a way out for those who simply don’t want – or don’t fit into – the corporate world of the office.
Now the world of social media has added an additional, attractive twist to the dream of being your own boss and making a killing. With ‘copy trading’ – which enables you to mimic the investment moves of the ‘professionals’ – you can supposedly cash in even if you know nothing at all about the markets.
The fact that this day-trading theme – the idea that anyone can just shuffle stocks around for a living – is showing up on public television, even in the UK, that companies see an opportunity to make money off these folks, and that big newspapers like the Telegraph report on it, even if tongue in cheek – that’s like so January 2000.
There are many parallels today to the zaniest days of the dotcom bubble, but this time, it’s different: it has a darker hue – particularly concerning retail investors.

This post was published at Wolf Street on September 29, 2014.

Brazil, Hong Kong, Spain -take your pick. International uncertainty is the order of the day, and it’s spilling over into U.S. markets. Investor concerns hitting bond and equity markets

Jon

Bubble bubble, toil and global troubles hit stocks
Brazil, Hong Kong, Spain -take your pick. International uncertainty is the order of the day, and it’s spilling over into U. S. markets.
First, exchange-traded funds that serve as emerging market proxies, like the Brazil ETF, are suffering. The iShares MSCI Brazil index is down 4 percent as voter polls over the weekend indicate the incumbent, Dilma Rousseff has only a small lead over Marina Silva. The country’s stock market there has little love for the incumbent.
The market’s favorite, Aecio Neves, is running a distant third, just as the first round of elections is next weekend. The top two candidates go to the second round, unless the leader has more votes than all other candidates combined. The fear in the markets is Rousseff may win on the first round.
One thing is clear: even if the incumbent prevails, she will be under substantial pressure from the markets to initiate reforms.
Freedom Erupts in China and Spain


This post was published at Investment WatchBlog on September 29th, 2014.

Spot The Total Logic Fail

Jon

It appears the leadership in Spain has reached its panic-point. Following Catalonia’s President Artur Mas signing of a decree calling for an ultimately democratic referendum on independence for the region, Spanish Prime Minister Rajoy uttered this mind-numbing phrase:
CATALAN VOTE PROFOUNDLY ANTI-DEMOCRATIC, RAJOY SAYS It appears Rajoy’s perspective on democracy and the will of the people is a little different as the situation has become serious enough that he has gone full-Juncker.
As The BBC reports,
“Catalonia wants to speak,” he said after signing on Saturday. “Wants to be heard. Wants to vote. Now is the right time and we have the right legal framework to do so.” The referendum’s two questions
“Do you want Catalonia to be a state?”
“If so, do you want Catalonia to be an independent state?”

This post was published at Zero Hedge on 09/29/2014.

Chris Kresser: Functional Health

Jon

Consumer Reports states that, person for person, health care in the US costs twice as much as it does in the rest of the developed world. And the kicker of their analysis: We don’t get much for our money. In a 2013 Commonwealth Fund study of 11 developed countries’ health care systems, the U. S. ranked fifth in quality and worst for infant mortality. America also did the worst job of preventing deaths from treatable conditions, such as strokes, diabetes, high blood pressure, and certain treatable cancers.
Today we welcome Chris Kresser to the program. Chris writes one of the most popular natural medicine blogs on the Web and has been named by Greatist.com as one of the 50 most influential voices in health and fitness.


This post was published at PeakProsperity on September 28, 2014,.

Carmen Segarra: Wall Street’s Spy Vs Spy

Jon

If you missed our coverage in 2012 of the Lower Manhattan Security Coordination Center where Wall Street sleuths from those serially charged firms like Goldman Sachs and JPMorgan dunk donuts alongside New York’s finest in a $150 million spy center, keeping tabs on the comings and goings of their own Wall Street employees as well as innocent pedestrians, then you may not fully appreciate why Carmen Segarra has been celebrated all weekend for her temerity in taping her boss and colleagues at the New York Fed, as well as employees inside the cloistered bowels of Goldman Sachs.
While Wall Street was spying on everyone else in lower Manhattan in a high tech center funded by the taxpayer, Segarra strolled over to a Spy Store, plunked down a modest sum and walked out with a tiny tape recorder. She then proceeded to capture the essence of the quintessential captured regulators who didn’t see the 2008 crash coming and won’t see the next one coming either – because their job is not to see too much. (We called the Spy Store on Saturday to ask if they had experienced an upsurge in sales of the tiny recorder. We were informed that sales were brisk but not unusual.)
Segarra is a lawyer and former bank examiner at the Federal Reserve Bank of New York, one of Wall Street’s key regulators, who charged in a lawsuit filed in October 2013 that she was told to change her negative examination of Goldman Sachs by colleagues, who also obstructed and interfered with her investigation. According to her lawsuit, when she refused to alter her findings, she was terminated in retaliation and escorted from the Fed premises.

This post was published at Wall Street On Parade on September 28, 2014.

‘Painful period’ for sector could be over

Jon

When investors think of precious metals it is usually gold that springs to mind, whether it is direct exposure to the commodity or indirect exposure through mining stocks.
However, there are other precious metals that investors can be exposed to, which used to more commonly form part of a long-term investment portfolio.
Silver, palladium and platinum are perhaps the most well-known of the precious metals.
This year has been difficult for gold, so have investors abandoned other precious metals? How have the prices of palladium, platinum and silver fared in 2014?
It is fair to say that precious metal prices have been under pressure this year as the dollar strengthens.
The average monthly price of silver had gained some momentum this year to reach $20.92 (12.81) per ounce in July but that fell back to $19.80 per ounce in August, according to data from Kitco.com.
Meanwhile, platinum prices have climbed during the year to a monthly average of $1,447.85 in August, from a low of $1,410.50 per ounce in February, peaking at $1,492.65 in July.

This post was published at TruthinGold on September 29, 2014.

Pending Home Sales Drop In August (After Record Surge In New Home Sales)

Jon

Following last week’s explosion higher in new home sales (despite surging record high prices), it is somewhat intriguing that pending home sales would tumble over 4.1% YoY, and drop 1.0% MoM (missing expectations of a 0.5% drop) and the 2nd biggest drop in 2014.
The ‘stunning’ rationale for this miss, provided by NAR’s chief economist, is… “fewer bargain-priced homes’ (which is odd given record prices and record surge in new home sales), and a “rising rate environment” (except rates are collapsing), with hope for the future based on the “employment outlook for young adults improving and their incomes rising” (more lies) and a “shift to more traditional first-time buyers who need mortgages” (except mortage apps are at 20-year lows).

This post was published at Zero Hedge on 09/29/2014.

Gold vs Silver during Precious-Metals Bull Markets

Jon

Below is an excerpt from a commentary originally posted at http://www.speculative-investor.com on 25th September 2014.
It is widely believed that silver outperforms gold during bull markets for these metals, but that’s only partially true. It’s true that silver tends to achieve a greater percentage gain than gold from bull-market start to bull-market end. It’s also the case that silver tends to do better during the final year of a cyclical bull market and during the late stages of the intermediate-term rallies that happen within cyclical bull markets. However, the early stages of gold-silver bull markets tend to be characterised by relative strength in gold. This is a point we’ve made in the past, including in TSI commentaries earlier this year, but warrants revisiting due to the recent price action.
The point we are trying to make is established by the following long-term chart of the gold/silver ratio. The boxes labeled A, B and C on this chart indicate the first two years of the cyclical precious-metals bull markets of 1971-1974, 1976-1980 and 2001-2011, respectively. Clearly, gold handily outperformed silver during the first two years of each of the last three cyclical precious-metals bull markets that occurred within secular bull markets. Therefore, while silver’s recent weakness relative to gold certainly doesn’t guarantee that a new cyclical bull market began last December, it is not inconsistent with our view that a new bull market began at that time.

This post was published at GoldSeek on 29 September 2014.