Despite lagging mortgage applications and home sales, homebuilder sentiment surged for the 4th month in a row to 59 (against expectations of 56) to its highest since November 2005. Prospective Buyer Traffic (hope) soared to 47. The South region rose dramatically as Midwest fell. The disconnect between hard data in the housing market and soft survey guesses by the homebuilders grows ever wider…
First this…
This post was published at Zero Hedge on 09/17/2014.
It’s a slow day in the neighborhood as the world awaits the Janet Yellen’s post-FOMC meeting press conference. It is almost like the old ‘Batman’ series with Adam West when they would get to the end of the show and leave you with a ‘cliffhanger:’
‘It’s a questionably unquestionable situation… Are the markets prepared for a shocking answer… Will Janet Yellen announce the final end to QE? Or electrify the bulls with more accommodation? Can Yellen’s eloquent elocution energize the markets…or will she magnetize the bears? Tune in next time Fed fans… Same Fed time… Same Fed channel’ While we wait in breathless anticipation for the next clue, I do find it interesting there is a rising belief that things have returned to some level of normalcy. As I noted yesterday, the bullish mantra is alive and well, and analysts have all turned their eyes skyward with price targets reaching as high as 2800 for the S&P 500 as noted by Jeffrey Saut at Raymond James:
‘Since 1989 the S&P 500’s earnings have grown by 6.15% annually. Extrapolating that into 2020 implies earnings of $183.36 (see chart on the next page). Using the historical median P/E ratio of 15.5x yields a price target of 2842 in 2020.’
This post was published at StreetTalkLive on Tuesday, 16 September 2014.
Yesterday’s exuberant equity market reaction has been largely defined by the mainstream media as driven by WSJ Hilsenrath’s ‘confirmation’ that Yellen will keep the uber-dovish phrase “considerable time” in the FOMC statement today. So, we wonder, why did the Fed-whisperer, after markets had closed last night, issue a quasi-retraction of his prediction explaining that instead of some prohetical “I just know” statement, it was a “best guess,” as he concluded, “will the Fed take these steps? Only the people in the room know that. The rest of us will see Wednesday afternoon.” It appears the sell-side disagrees with him on the language…
Via WSJ,
In a webcast Tuesday, I explained why I thought the Federal Reserve would stick with, but qualify, an important phrase in its policy statement Wednesday which assures near-zero interest rates for a ‘considerable time.’ This was simply my best analysis of where I think the Fed is going based on what we have been reporting and what officials have said in the past. …
Here’s my analysis: Janet Yellen is a methodical individual and the Fed, in normal times, is a slow-moving institution. It takes time for debates to play out. Ms. Yellen is seeking consensus, as we reported earlier this week. The considerable time debate doesn’t feel ripened or fully aired. When Ms. Yellen has used the phrase in recent months she has qualified it, but not suggested changing it. Meantime the Fed has other business on its plate. The exit plan has been in the works for months, as has the plan to end bond buying. Changing the ‘considerable time’ guidance now, while also announcing an exit plan, could be viewed by market participants as a surprising move toward raising rates.
This post was published at Zero Hedge on 09/17/2014.
Silver Prices: 1972 – 1979
‘ Silver moved upward from about $1.40 in 1971, rallied to about $6.40 in March 1974, and fell to about $4.30 in August 1977. ‘The March 1974 peak took about 3 years and ended about 4.55 times its starting point. ‘The August 1977 low took another 3.5 years and fell about 33% from the peak price.
This post was published at SRSrocco Report on September 16, 2014.
For those understandably disgusted by the reckless expansion of the US money supply over the past six years, it’s vitally important to remember that the road to our monetary endgame is not a straight line, nor necessarily intuitive.
I have long been a dollar bull, not for any over-arching reasons based on inflation, deflation, rising geopolitical multi-polarity or any of the other issues that touch on the dollar’s valuation vis- -vis other currencies. My analysis focuses on a few basics: the dollar’s status as the global reserve currency, Triffin’s Paradox (a.k.a. Triffin’s Dilemma) and global capital flows into the dollar and dollar-denominated assets such as U. S. Treasury bonds.
Reserve Currencies vs. Trading Currencies When we say the U. S. dollar is the global reserve currency, what does that mean? There is often some confusion about the difference between a trading currencyand a reserve currency. Let’s use an example to explain the difference.
Country A trades $10 billion of goods and services with Country B, which does $10.01 billion of trade with Country A. The two nations agree to a trade pact that enables the two nations to trade currencies directly, that is, without converting the payments for trade into a third currency such as the dollar.
This post was published at Charles Hugh Smith on TUESDAY, SEPTEMBER 16, 2014.
Secessionist movements have gained in popularity in recent years as the global economic crisis persists and as people awaken to the fact they are owned by people often thousands of miles away. Making headlines most recently is a movement in Scotland seeking independence from London and the United Kingdom (UK). Whatever way Scots vote on Thursday, the seeds have been sown for a Scotland that will, in the future, become increasingly independent (at least mentally).
Whether Scotland votes yes or no Thursday is still an unknown. The race is reportedly in a dead heat. The media is arguing across the spectrum that independence for Scotland would bring turmoil to the region as if the UK has navigated the economic crisis unharmed.
The media wants to drive home this following point: A yes vote will render Scotland a powerless state with crushing debt and no financial infrastructure, because all of that infrastructure will head south. The European Union will shun Scotland as will NATO and the US. Paul Krugman added to the fear: ‘Be afraid, be very afraid” the amateur economist wrote. The Scots have a bit of anxiety, but the fear factor is overplayed.
Nonetheless, the Scottish are investing in physical gold. Purchases of gold rose by 42% over the past two weeks, according to BullionVault.com. CoinInvest also saw a “significant upturn” in UK trading.
This post was published at Dollar Vigilante on September 16th, 2014.
Poor Americans carry deeper debt levels than they did during the depths of the Great Recession. To boost auto sales, many dealers have decided to offer subprime loans to prospective clients that have very little financial means. Many for-profit colleges have a business model that virtually solicits and lures in poor Americans into their debt saddling paper mills. So it is probably no surprise that poor Americans are now carrying the heaviest debt loads in history. The argument is interesting from some of these financial institutions and similar to what was being delivered during the subprime housing days. These ‘generous’ lenders are making loans where no one else is. Of course the caveat is they are gambling with other people’s money. In the case of student debt, the American people will foot the bill for any implosion that happens and in the mean time salaries for executives at these institutions are extremely high. The model of financing based on too big to fail is all too familiar. The financial system has mastered the art of being a viper and extracting all wealth possible before things go bust. Poor Americans are in worse shape today than during the Great Recession.
The poor are massively in debt
Our system has replaced access to debt with wealth. The days of prudently saving and paying for college or actually buying a car outright seem like a distant memory. When many universities charge $40,000 or $50,000 per year in tuition how is the typical US household making $50,000 per year going to pay for their kids to go to school? They can’t. And that is why we have a massive student loan bubble with $1.2 trillion in outstanding debt and the CBO is projecting another $1 trillion over the next decade.
While American households overall have deleveraged since the Great Recession hit, poorer households have not:
This post was published at MyBudget360 on September 16, 2014.
Following yesterday’s stagnant PPI, today’s CPI is a shocker. Core CPI rose a mere 0.01% MoM – its weakest gain since Jan 2010. The ‘weakness’ was driven by energy (-2.6%), airline fares (-4.7%), clothing (-0.2%), and used car prices (-0.3%) tumbling. The headline CPI dropped 0.2% MoM (against a 0.0% expectation) – its biggest drop since March 2013. The 1.7% YoY gain (missing expectations) is the weakest rise since March 2014.
Core CPI slowest since 2010…
This post was published at Zero Hedge on 09/17/2014.
A very interesting post on HBR Blog (mapping technological uncertainty against demand uncertainty across major industries. Two charts:
This post was published at True Economics on Tuesday, September 16, 2014.
Germany sold EUR 3.34 billion 2-year notes to a desparate-for-collateral, safe-haven-seeking, ECB QE-front-running, deflation-pricing market (with exceptional demand – an elevated 2.26x bid-to-cover) for a stunning -0.07% yield… an all-time record low yield issuance for Germany. We have nothing to add…
Chart: Bloomberg
Average:
This post was published at Zero Hedge on 09/17/2014.
Facts and figures from the silver market SENTIMENT: Sentiment for gold (and silver) is very weak – as low as it was at the bottom in June 2013. This suggests both gold and silver are again at or near a bottom.
GOLD TO SILVER RATIO: The ratio is currently about 66 – near the high end of the slowly declining range for the past 27 years. See the graph and note that a high ratio indicates silver is too inexpensive in relation to gold. All of the ratio peaks (February 1991, March 1995, March – May 2003, October 2008, and July 2013) occurred at significant silver lows.
This post was published at GoldSilverWorlds on September 17, 2014.
Regarding Chinese gold demand, which we wrote about yesterday, it is open to debate and our old friend, Brien Lundin of the Jefferson Companies in New Orleans, wrote to share his insights. We’ve chosen to share them further with our readers, with his approval. Brien wrote:
* * *
Hi, Dennis:
In your letter this morning, you noted that Chinese gold demand was recently reported to be down about 50 percent year over year. This is erroneous information from the World Gold Council, as I’ve been noting in Gold Newsletter — that there’s a lot of misinformation on this topic. The mainstream financial media keeps parroting numbers from the World Gold Council and other sources, which typically rely on import statistics from Hong Kong.
However, China has recently opened up new ports of entry for gold, a move that has correspondingly reduced the import numbers from Hong Kong.
"Much more relevant are gold delivery statistics from the Shanghai Gold Exchange, which directly indicate wholesale gold demand in China. Koos Jansen is today’s leading reporter of Chinese gold demand dynamics, and he relies on the Shanghai Gold Exchange numbers for his analyses. Using the SGE reports, Jansen notes that Chinese gold demand year to date is down about 17 percent from last year’s torrid pace.
This post was published at GATA
A fifth of France’s 100 richest people have moved a total of 17 billion to neighbouring Belgium in recent years, a report showed at the weekend, saying the exodus is largely due to French socialist President Franois Hollande’s tax policies.
The report, published in Belgian financial daily L’Echo, lists France’s richest man, LVMH CEO Bernard Arnault, media moguls Stphane Courbit and Bernard Tapie, as well as the Mulliez family, which controls the Auchan supermarket chain, among those who have made the move.
But many of France’s wealthy appear to have crossed over the border only recently.
Many “have shown up in the past three years, in other words since Franois Hollande was inaugurated as president,” the paper writes, attributing it to the socialist government’s pressure to get the economy back into the black amid soaring unemployment and a ballooning deficit.
This post was published at France24
The following video was published by Greg Hunter on Sep 16, 2014
John Embry, Chief Investment Strategist at Sprott Asset Management, thinks gold price suppression is a key factor in global monetary policy. Embry contends, ‘If the gold price truly reflected what is really going on in monetary policy today, I think real interest rates would rise quite significantly. Given the amount of debt that is polluting the world banking system, to me, this is the end game, and that’s why it’s so vicious in terms of suppression right now. When this turns, it is going to change a lot of things. That’s why they are being so aggressive on maintaining pressure on the gold and silver prices. Silver is especially suppressed. I don’t think you can dig it out of the ground for less than $25 per ounce. It’s not like gold. There is not a huge above ground inventory.’ Embry adds, ‘I have never seen it any more intense in terms of pressure in the paper market, which indicates we are near the end, and there is something seriously wrong with the system.’
It has been a story of central banks, as overnight Asian stocks reversed nearly two weeks of consecutive declines – the longest stretch since 2001 – and closed higher as the same catalysts that drove US equities higher buoyed the global tide: a combination of Chinese liquidity injection (for the paltry amount of just under $90 billion; “paltry” considering Chinese banks create over $1 trillion in inside money/loans every quarter) and Hilsenrath leaking that despite all the “recovery” rhetoric, the Fed will not be turning hawkish and there will be no change in the Fed language today (perhaps not on the redline but Yellen’s news conference at 2:30pm will certainly be interesting), pushed risk higher, if not benefiting US equities much which remains largely unchanged.
Overnight Goldman joined Hilsy in predicting “no change” to the language, when its strategists said the Fed won’t drop “considerable time” from statement today and the language will instead be watered down and dropped in months ahead. However, if past Yellen press conferences are any indication, watch for her to once again define just how many months “considerable time” implies, although if she says 6 months again, algos may be confused.
Other banks disagreed, with Deutsche Bank’s base case is that the phrase will be dropped this time round for two key reasons. First removing the language gives the Fed more flexibility to act sooner if the economy outperforms against expectations in the months ahead. Secondly, Committee participants on both the hawkish and dovish sides (as well as the center) have publically expressed that it is time to remove the language. So it is likely that the Yellen will agree to make this language change but only if she feels this can be achieved without causing the market to bring forward significantly its expectations about the timing of the first rate hike. All eyes will therefore be on the press conference where Yellen will likely emphasise that the change is not intended to signal a significant advance in the timing of the first hike but rather the timing will be based on recent and prospective economic performance of which the key labour market and inflation indicators are still much below desired levels.
As DB’s Jim Reid notes, given that the removal of this key phrase has probably been increasingly priced in over recent days, it didn’t take much for the Dollar to slip yesterday after the WSJ’s Jon Hilsenrath said that he thinks the Fed may keep the words -considerable time? in its policy statement but qualify them instead. The WSJ correspondent thinks that given the economic backdrop, the Fed wouldn’t want to send a signal right now that rate hikes are imminent. He also thinks that the Fed will focus on its QE exit strategy in this meeting and that they may think that by focusing on both the exit strategy and guidance changes at the same time, it will be too much for the market to handle. So for him the “considerable time” language stays. The recent minutes suggested that the Fed was indeed close to agreeing on updating their exit strategy on asset purchases when they met in July.
This post was published at Zero Hedge on 09/17/2014.
China may join other emerging countries in boosting gold reserves as the precious metal makes up a smaller share of its foreign-exchange holdings compared with developed economies, said a London-based researcher.
The country hasn’t announced any changes to state gold reserves since authorities in 2009 said holdings totaled 1,054.1 metric tons. While China holds the world’s biggest foreign-exchange reserves, bullion accounts for 1.1 percent of the total, compared with about 70 percent for the U. S. and Germany, the biggest gold holders, World Gold Council data show.
‘It is clear that western central banks over time will be reducing their reserves and China and other Asian countries will be increasing,’ David Marsh, managing director at the Official Monetary and Financial Institutions Forum, said in a Sept. 11 interview in Beijing. ‘Gold will become more traded amongst central banks in the next 30 years because there are colossal imbalances in world gold holdings as a percentage of overall asset reserves.’
Central banks, net buyers of gold for 14 straight quarters, helped limit bullion’s losses last year that were the most since 1981 and may increase purchases to as much as 500 tons this year after adding 409 tons last year, the London-based council said Aug. 14. The precious metal rose 3 percent this year as geopolitical tensions boosted demand for a haven.
This post was published at TruthinGold on September 16, 2014.
‘The most important book on the Euro from an Austrian Economics point of view,’ that is how Jeff Deist, President of the Mises Institute, referred to the book ‘The Tragedy of the Euro.’ The book was written by Philipp Bagus, professor of economics at Universidad Rey Juan Carlos in Madrid, is a young scholar with a large influence, having forecast all the problems with the Euro and having persuaded many economists on the Continent that this currency is no better than any fiat currency (source: Mises Institute).
Jeff Deist speaks to author Philipp Bagus in the interview which is available below. We highlight some extremely interesting quotes from the interview. The discussion is a must-listen for everyone who wants to understand the fundamental issue with the Euro. The book has a dedicated page on the Mises Institute website where it is available in ebook format. Additionally, readers should definitely check the new summary of the book, written by Claudio Grass, managing director from Global Gold Switzerland, in his latest outlook report.
According to Philipp Bagus, the Euro was an attempt to get rid of the disciple of the Bundesbank (German central bank). The Bundesbank was trying to inflate less, due to the ‘inflation-phobia’ from the German population (caused the hyperinflation of 1923) and the inflationary period after WW II. One German generation experienced the loss of all their savings twice. That is why the German central bank relied much less to the money printing machine than the other European countries. So if the other European countries wanted to keep the exchange rate more or less stable with the German Mark, they had to follow the monetary policy of the Bundesbank. In other words, if the French government had a deficit and wanted their central bank to finance it, there was a depreciation of the French Franc, which is embarassing to politicians. The Euro was an attempt to get rid of this discipline that the Bundesbank was putting on European monetary policy.
This post was published at GoldSilverWorlds on September 17, 2014.
The good news is that the rigging of the FX markets – now conspiracy fact, not conspiracy theory – has, according to Bloomberg, forced the world’s biggest banks to overhaul how they trade currencies to regain the trust of customers and preempt regulators’ efforts to force changes on an industry tarnished by allegations of manipulation with the “modernization of processes that probably should have been brought in 15 or 20 years ago.” However, the FX market is far from ‘clean’ as Bloomberg notes, while banks can limit access to details about client orders on their computer systems, they can’t keep employees from talking to one another. Some traders also are still communicating with clients and counterparts at other firms via Snapchat, circumventing their company’s controls right under the nose of the SEC. As one trader commented, “these [reform] changes look like fig leaves.”
This post was published at Zero Hedge on 09/16/2014.
Where does capital really come from?
Most US policymakers believe that capital comes from debt issued by the Fed and its member banks; most other big debtor countries agree (i.e. Japan). On the other hand, policymakers of the world’s biggest creditor nations (led by China) believe that real capital is the surplus produced from production and trade (which has been mainly accumulated in US dollars and ultimately backs the US dollar as the primary reserve currency).
For the past 7-12 years the two conflicting ideas about capital have begun to have noticeable effects in certain global asset markets. The chart below, showing gold, oil, and Fed Funds rates, illustrates what has occurred. For most of the three decades from 1973-2002, these asset classes traded closely together; in the last decade, they have been diverging dramatically.
This post was published at Zero Hedge on 09/16/2014.
The following video was published by X22Report on Sep 16, 2014
Germany recovery is now falling a part and investor sentiment has fallen for 9 consective months. Shanghai gold exchange going live earlier than expected. FED giving illegals more time keep Obamacare. NSA program has been renewed and is continually spying on the American people. China sending more medical personnel to West Africa, meanwhile US is sending 3000 military personnel. NATO rejects Crimea vote, says illegal. US deploying another 1600 military advisers to Iraq which brings the total up to 3900 boot on the ground. Corporate media, US Government making the link between Assad and the Islamic State in preparation to attack Syria.
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