“Everyone Is Doing It”: How Carmakers Manipulate Emissions Test Results

With Germany’s largest company by revenue, Volkswagen, deep in damage recovery mode, and the market still unable to decide just how systemic and profound the fallout will be from the emissions scandal which has already cost the job of VW’s CEO and which according to some will impact the GDP of Hungary and the Czech republic as much as -1.5%, many are still trying to determine not if but how many other companies – whether “clean diesel” focused or otherwise – will be impacted by the crackdown on emissions fraud.
We don’t know the answer suffice to speculate that it will be “many” for one simpler reason: there are dozens of ways to manipulate emissions tests in both the lab and on the road, and with the temptation to “reduce” emissions all too great for management teams laser-focused on boosting profit margins, one can be certain that in this particular case not only is there more than one cockroach, there are dozens.
The chart below from Transport and Environment shows some of the traditional ways in which carmakers manipulate CO2 emissions tests to make their cars appear more efficient:

This post was published at Zero Hedge on 10/03/2015.

Migrant Crisis Sparks Balkan Border Battles As EU Buckles Under Overwhelming Refugee Flow

When last we checked in on Europe’s worsening migrant crisis, Brussels had just approved a plan which aims to settle some 120,000 asylum seekers by way of a mandatory quota system. Hungary, the Czech Republic, Slovakia and Romania were opposed which, as WSJ noted, ‘sets the stage for intensified friction within the bloc over the contentious issue.’
To be sure, calling the crisis a ‘contentious issue’ is something of an understatement. The massive people flows stemming from Syria’s protracted civil war threaten to tear the EU apart just months after fraught negotiations with Greece over the country’s third bailout program very nearly ended in the conclusive debunking of the euro indissolubility thesis.
The Balkans have become the frontlines of the crisis as refugees make their way north to the German ‘promised land’ where cold beer and Merkel selfie photo ops beckon. Unfortunately (if you’re a fleeing migrant), Serbia, Croatia, and especially Hungary aren’t excited about being used as a kind of migrant superhighway and once the number of refugees streaming across its southern border became too much to bear, Hungary built a 100-mile razor wire fence. Of course when you’re fleeing bullets, barrel bombs, and sword-wielding jihadists, a 12 foot high fence isn’t much of a deterrent and so some refugees attempted to test Hungarian premier Viktor Orban’s resolve by demanding to be let through. Here’s what happened next:

This post was published at Zero Hedge on September 25, 2015.

Rates Stuck at 0%, Negative Rates Growing Globally, Gold and Silver Updates

Gold and silver surged on news that the FOMC ruled that they will not raise rates, not just yet. Low inflation rates and a low growth rates are keeping historic 0% rates for longer. This should not be a surprise to gold and silver investors who know the massive amount of debt will never allow rates to rise significantly as the biggest fear for central bankers is deflation.
With over $4 trillion in corporate debt coming for renewal over the next 5 years, it is not just the US Government sensitive to higher rates. If rates did rise it would implode the tens of trillions of dollars of debt. Rising rates would also encourage savings and less speculative capital. The system is already struggling with too much cash sitting on the sidelines and negative rates would encourage idle cash to be pushed into the system. Such a scenario becomes increasingly more likely as growth stalls and liquidity becomes more constrained.
The game is not over because the tens of trillions in debt issues are not over. Debt continues to grow globally so what has been fixed since the last crisis? By rising rates significantly the debt scheme will. Instead we are dealing with a condition of negative rates which are spreading globally:

Switzerland is not the only one printing local currency to devalue their relatively strong currencies. Recently the Czech Republic entered the negative rates for the first time by selling 3-year bonds at -0.001%. The Czech Central Bank printed nearly $4B worth of Czech currency in August alone to maintain a 27Kc to 1 Euro floor. Such an imbalances caused by fixed rates is allowing the Czech CB to load up their reserves with ~$62B worth of Euros. The strength comes from the Czech Republic having the highest GDP growth rate in Europe which is supported by their most industrialized EU country, at 47.3% of the economy.

This post was published at SilverSeek on September 18, 2015 –.

Europe Approves “Military Action” Against People Smugglers As Germany Warns 1 Million Refugees Coming

Europe’s refugee crisis is getting worse by the day.
Less than 24 hours after Germany announced it would impose border controls with Austria, followed promptly by the Czech Republic, Slovenia and now the Netherlands, German vice chancellor Sigmar Gabriel predicted that as many as 1 million refugees may arrive by the end of the year as other nations moved to fortify their frontiers.
As Bloomberg notes, the revised prediction “underscored how quickly the numbers fleeing to Germany are spiraling upward. The official government estimate, released just a few weeks ago, is for roughly 800,000 in 2015, nearly four times the 2014 figure.”
Felix Braz, the justice minister of Luxembourg, underscored the severity of the situation: “Of course, the idea is not to prolong this, but it’s a short-term measure that should be in place for as short a time as possible,’ ‘A lot will depend on what comes out of Brussels this afternoon.”

This post was published at Zero Hedge on 09/14/2015.

China’s Economy Is Undergoing a Huge Transformation That No One’s Talking About

The photo you see below was snapped recently in Beijing. It might not be that special to some readers, but in my 25 years of visiting the Chinese capital, I’ve never seen a blue sky because it’s always been blotted out by yellow smog. Beijing is clearly undergoing a massive transformation right now. This might please proponents of the green movement, but it’s ultimately harmful to the health of China’s manufacturing sector.
On the other hand, blue skies could be ahead for China’s service industries.
Misconception and exaggeration are circling China’s economy right now like a flock of hungry buzzards. If you listen only to the popular media, you might believe that the Asian giant is teetering on the brink of economic disaster, with the Shanghai Composite Index’s recent correction and devaluation of the renminbi held up as ‘proof.’
Don’t get me wrong. These events are indeed significant and have real consequences. They also make for some great, sensational headlines, as I discussed earlier this month.
But what gets hardly any coverage is that China’s economy is not weakening so much as it’s changing, much like Beijing’s skies. Take a look at the following two charts, courtesy of BCA Research:
You can see that the world’s second-largest economy has begun to shift away from manufacturing and more toward consumption and the service industries. While the country’s purchasing managers’ index (PMI) reading has been in contraction mode since March of this year, the service industries – which include financial services, insurance, entertainment, tourism and more – are ever-expanding. The problem is that the transformation has not been fast enough to offset the massive size of the manufacturing sector.
Just as a refresher, the PMI is forward-looking and resets every 30 days. It helps investors manage expectations. Consider this: The best-performing country in our Emerging Europe Fund (EUROX) is the Czech Republic – which also happens to have one of the highest PMI readings. Coincidence?
In China, overseas travel, cinema box office revenue and ecommerce are all seeing ‘explosive growth,’ according to BCA. The country’s once-struggling real estate market is also robust. The government just relaxed rules to permit more foreigners to purchase mainland property.

This post was published at GoldSeek on 1 September 2015.

German Economic Council Backs Exit For “Uncoooperative” Eurozone Members

Now more than ever, the world is raising serious concerns about the long-term viability of the EMU. The crisis in Greece and the deep divisions between Athens and its creditors regarding the viability of fiscal ‘adjustments’ have laid bare the currency bloc’s weaknesses and have underscored the difficulties inherent in managing a common currency in the absence of political and fiscal unity.
Reservations about the “experiment” recently caused the likes of Poland and the Czech Republic to express their reluctance to adopt the common currency with Polish central bank chief Marek Belka hilariously characterizing the EMU as a “burning building.” “You shouldn’t rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, don’t expect us to be enthusiastic about joining,” he said.
Indeed.
Of course once the house burns down and the former occupants (those that made it out anyway) are standing around outside surveying the still-smoldering ashes, no one wants to be labeled an arsonist, which is presumably why Germany’s five economic “wisemen” decided that now might be a good time to pen a “special report” (press release, executive summary) on crisis response in the euro area.
Unsurprisingly, the “independent” assessment of the German Council of Economic Experts concludes austerity programs in Spain, Ireland, and Portugal were “successful” and as for Greece, well, they don’t know what happened there but it’s certainly not entirely the fault of misguided crisis management and if anything, it simply means that member countries should turn over more of their fiscal autonomy to BerlinBrussels.

This post was published at Zero Hedge on 07/28/2015.

JULY 27/CHINESE DEMAND FOR GOLD IN LATEST WEEK RISES TO 69 TONNES/SO FAR THIS YEAR 1366 TONNES FOR 7 MONTHS/GREEK BANKS ARE IN SHAMBLES/ECB WILL NOT LET GREECE STOCK EXCHANGE OPEN/POLAND AND CZEC…

Good evening Ladies and Gentlemen:
We are entering options expiry week.
Comex options expiry Tuesday, July 28.
LMBA options expiry: noon London time July 31.2015
OTC options expiry: midnight July 31.2015
Here are the following closes for gold and silver today:
Gold: $1096.50 up $10.90 (comex closing time)
Silver $14.59 up 11 cents.
In the access market 5:15 pm
Gold $1095.20
Silver: $14.57
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a poor delivery day, registering 0 notices for 0 ounces . Silver saw 91 notices filed for 455,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 244.29 tonnes for a loss of 59 tonnes over that period.
In silver, the open interest rose by 55 contracts despite the fact that Friday’s price was down by 20 cents and the gold price was pummeled (down $8.40). The total silver OI continues to remain extremely high, with today’s reading at 190,439 contracts now at decade highs despite a record low price. In ounces, the OI is represented by .951 billion oz or 135% of annual global silver production (ex Russia ex China). This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end as they continue to raid as basically they have no other alternative. Today again, we must have had bankers contemplating falling off the roof due to silver’s refusal to buckle with respect to open interest.
In silver we had 91 notices served upon for 455,000 oz.
In gold, the total comex gold OI rests tonight at 443,402 for a loss of 11,910 contracts as gold was down $8.40 on Friday. We had 0 notices filed for nil oz today.
We had no withdrawals in gold tonnage at the GLD / thus the inventory rests tonight at 680.15 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. I thought that 700 tonnes is the rock bottom inventory in GLD gold, but I guess I was wrong. However we must be coming pretty close to a level of only paper gold and the GLD being totally void of physical gold. In silver, we had no change in inventory at the SLV / Inventory rests at 328.834 million oz.
We have a few important stories to bring to your attention today…

This post was published at Harvey Organ Blog on July 27, 2015.

Poland, Czech Republic Won’t Join “Burning” Euro

With the turmoil in Greece proving once and for all that in the absence of a fiscal union, the EMU simply cannot function or if it does, it will be subject to episodic crises stemming from endemic differences of opinion on fiscal policy, outsiders could be forgiven for looking upon the currency experiment as an abject failure.
Indeed, the struggle to secure a bridge loan for Athens last week underscored the degree to which non-euro countries are reluctant to put their taxpayers on the hook for problems which they believe are the result of an ill-fated attempt to unite fundamentally different economies and governments under a single currency.
Given the above, we weren’t surprised to learn that Poland and the Czech Republic are out voicing their reservations about running into what is effectively a burning building. Here’s The Telegraph on Poland:
Poland will not join the euro while the bloc remains in danger of “burning”, its central bank governor said.
Marek Belka, who has also served as the country’s prime minister, said the turmoil in Greece had weakened confidence in the single currency.
“You shouldn’t rush when there is still smoke coming from a house that was burning. It is simply not safe to do so. As long as the eurozone has problems with some of its own members, don’t expect us to be enthusiastic about joining,” he said.

This post was published at Zero Hedge on 07/27/2015.

Bail-Ins Coming – EU Gives Countries Two Months To Adopt Rules

– 11 countries face legal action if bail-in rules are not enacted within two months – Bail-in legislation aims at removing state responsibility when banks collapse – Rules place burden on creditors – among whom depositors are counted – Austria abolished bank deposit guarantee in April – ‘Bail-in regimes’ coming globally
The European Commission has ordered 11 EU countries to enact the Bank Recovery and Resolution Directive (BRRD) within two months or be hauled before the EU Court of Justice, according to a report from Reuters on Friday.
The news was not covered in other media despite the important risks and ramifications for depositors and savers throughout the EU and indeed internationally.
The article ‘EU regulators tell 11 countries to adopt bank bail-in rules’ reported how 11 countries are under pressure from the EC and had yet ‘to fall in line’. The countries were Bulgaria, the Czech Republic, Lithuania, Malta, Poland, Romania, Sweden, Luxembourg, the Netherlands, France and Italy.

This post was published at Gold Core on June 3, 2015.

Debt-Equity Swaps

Debt-equity swaps were used in the former Soviet satellites in Eastern Europe. This was the chief method of making the transition from communism to capitalism. Poland implemented an extensive privatization program back in 1990 and had privatized half of all state-owned enterprises by the end of 1994. Indeed, debt-equity swaps were introduced into the Polish process in 1994, primarily for use by Polish banks in converting their non-performing loans into equity stakes in the debtor companies. Nevertheless, foreign debt was not eligible for use in these Polish debt-equity swaps, although there were suggestions in 1995 and 1996 that external foreign debt should be.
Other Eastern European countries, such as Croatia, the Czech Republic, and Hungary, have used debt-equity swaps to enable banks to exchange debt for equity in highly indebted local companies so that the local banks become shareholders in the companies. Bulgaria has likewise made extensive use of debt-equity conversions, primarily of external debt in the form of Brady bonds.

This post was published at Armstrong Economics on March 29, 2015.

Why Bad News Is Good News in Europe – 7 Charts Showing What You Really Need to Know

There’s little denying that the U. S. economy is on the upswing since the recession. Manufacturing is strong, jobless claims are falling and wages are rising. Delta Airlines, which we own in our Holmes Macro Trends Fund (MEGAX), recently announced that it will be giving its 80,000 employees $1.1 billion in profit sharing, while Wal-Mart, held in our All American Equity Fund (GBTFX), unveiled plans to hike its minimum wage to $9 an hour in April.
Indeed, things are shaping up here in the U. S., but unfortunately this has not been the case in Europe. From Greek drama to Russian aggression, bad news seems to be the order of the day.
Until now.
Because of central banks’ monetary easing, weakening currencies and low fuel costs – courtesy of the American fracking boom – Europe is finally showing signs that it’s ready to turn the corner and set a path toward lasting economic recovery.
Emerging Europe PMIs Swinging Up The Purchasing Managers’ Index (PMI), as I’ve often said, is a highly effective tool that we use to forecast manufacturing activity six months out. Any reading above 50 indicates growth in manufacturing; anything below, contraction. This allows us to manage our expectations and get a good sense of where to position our funds.
As you can see, the European Union (EU) as a whole has recently improved, but emerging countries such as the Czech Republic, Poland and Hungary are posting very solid numbers in the mid-50s range. Much of this is due to low fuel costs and weaker currencies, which make exports more attractive.

This post was published at GoldSeek on 24 February 2015.

Austrian “Freedom” Party Demands Bailout For Swiss Franc Speculators (From “Monstrous Monetary Policy”)

The phrases “it’s just not fair” and “waa waa waa” were not seen in Austria’s Freedom Party’s statement demanding a bailout for Swiss-Franc-denominated borrowers(i.e. people who were willing to speculate on FX rates with their house as collateral in order to get a lower interest rate in order to afford a bigger home that they really couldn’t afford in real risk-adjusted terms). What Austria needs, general secretary Franz Kickl exclaimed is “a general regulation and an offer to all Franc borrowers,” adding that “it cannot be that Austrian borrowers are the only ones who keep their losses even they are indemnified in Hungary, Croatia and perhaps even in Poland, the Czech Republic and Slovakia.” Which does sound oddly like ‘waa waa waa’?
Austria Freedom Party Statement (via Google Translate):
Kickl: Freedom Party calls for aid package for Franken-borrower…

This post was published at Zero Hedge on 01/26/2015.

Boom, Bust, Lies and Claptrap!

Embracing Risk Dow up big time on Thursday – 259 points, or 1.5% Gold up too – to over $1,300 an ounce. This year is going to be a hoot. Boom, bust, lies and claptrap – we’re going to have it all!
What accounted for Thursday’s big bullish surge? From Bloomberg:
‘The MSCI Emerging Markets Index added 0.8% to 983.53. Russia’s dollar-denominated RTS Index rose the most in the world and the ruble strengthened as the ECB’s move encouraged investors to buy riskier assets.
Gauges in Poland, Hungary and the Czech Republic increased at least 0.9%. Oil producer Petroleo Brasileiro led gains in Brazil. Asian stocks jumped as China pumped funds into the financial system.
ECB President Mario Draghi unveiled a quantitative easing plan of 60 billion euro a month until at least the end of September 2016. The move, which is intended to counter slowing growth and the threat of deflation, may spur capital inflows into developing countries. China’s monetary authority used open-market operations to add cash to the financial system for the first time in a year and spurred loans amid a fund shortage.’

This post was published at Acting-Man on January 26, 2015.

Citigroup to Exit Retail Banking in 11 Markets

Citigroup customers across Central America and parts of Eastern Europe will be looking for a new place to bank next year.
Citigroup said Tuesday that it will bow out of the retail banking business in 11 markets, part of its ongoing effort since the financial crisis to restructure and slim down. The news came as the bank announced third-quarter earnings.
Citi said the impact would primarily be smaller countries in Latin America: Costa Rica, El Salvador, Guatemala, Nicaragua, Panama and Peru. It will also exit consumer banking in Egypt, Japan, the Czech Republic, Hungary and Guam.
The bank is exiting those areas to focus on market share and growth potential in places where it believes it can be competitive, Citigroup CEO Michael Corbat said in a statement. It will still have institutional banking operations in these areas.

This post was published at ABC News