The Political Crisis in Germany Changes the Game

Merkel faces the worst crisis of her career and many behind the curtain are starting to wonder if she will even survive. The German Federal President Steinmeier could not actually order new elections immediately. The procedure in this regard is quite complicated in Germany. The earliest possible alternative would be to hold new elections come the spring of 2018. It is likely that the AFD is likely to gather even greater support from new elections. Nonetheless, the CDU will continue to support Merkel at least right now. However, the CDU has been severely weakened by the election and if we do not see new elections until the spring, there is a distinct possibility that Merkel’s support even within the CDU could collapse if they see the AfD will win even greater support.
The head of the Federation of German Industries (BDI), Dieter Kempf, has chastised the political leaders calling on the SPD, FDP and Greens to form a coalition. The price that the SPD will demand is that Merkel leaves before they would consider any compromise. There is just bad blood now between the SPD and CDU. Of course, this makes it even more likely we see and even more difficult Brexit. The practical crisis is the fact that Merkel must attend to domestic issues and will not truly have the time or authority to assume a leadership role in Brussels.

This post was published at Armstrong Economics on Nov 22, 2017.

Ignore Merkel And Brexit: According To Bill Blain, A New Threat Can Bring Europe Crashing Down

Blain’s Morning Porridge, Submitted by Bill Blain of Mint Partners
Europe is like a 4D game of Jenga, and Germany is a very wobbly block – as are the banks
Europe is an enormous 4 dimensional game of Jenga. At the moment there are far too many blocks in play. Some of them are likely to leave the edifice teetering but standing. The question is: will any cause it to tumble?
Top of the wobbly blocks list is Merkel – what happens next in Germany? The CDU’s disastrous shift left has opened the door for the extreme right, and has fractured her own support.
Merkel’s survivability is questionable. In her wake, all efforts to rejig Europe via closer union and monetary/fiscal harmonisation via banking union are absolutely on hold while the German constitutional crisis (yep, for that is what it is) plays out.
Markets don’t seem particularly worried – they have become blas about political risk and look to the upside of Germany’s apparent rosy and robust financial strength. What’s not to like about Germany? What can possibly go wrong – it regards the current Merkel issue as a short-medium term minor concern. Get over it.
On a purely German basis they might be right. The critical thing for Europe is who follows Mutti?
Merkel’s threats to call another vote rather than continue coalition talks looks like bluster – sounds like she’s trying to scare the opposition parties into a deal rather than go through the uncertainty of second election. If it comes to a second vote, it’s another miscalculation.

This post was published at Zero Hedge on Nov 21, 2017.

FX Weekly Preview: EUR Darts Back To Uptrend, But Can It Last

Submitted by Shant Movsesian and Rajan Dhall MSTA of fxdailyterminal.com
The key move in the FX majors last week as the upturn in EUR/USD, where the first key area of support on the downside at 1.1500-1.1625 held well to generate the move up into the mid-upper 1.1800’s. In the previous week we also asked whether the USD correction was over, and some may assume that based on the key weighting in the USD index – it is. Clearly the longer term outlook on Europe has been the driver of what is now seen as a default position in FX. The German economy has been leading the way with solid growth, as Q3 saw a rise of 0.8%, which should be confirmed on Thursday. Alongside this, we get the PMI data for Nov which will likely confirm more of the same across the whole Euro region, with the German IFO on Friday unlikely to buck the positive trend as the institute maintain their positive growth projections.
Over the weekend however, the coalition talks in Germany have made the headlines with the FDP leader walking out of the negotiations with Chancellor Merkel’s CDU and the Greens, with wide ‘differences’ of opinion on immigration and climate amongst other issues lower down the pecking order. This leaves Merkel with 3 options; a new election, governing without a majority or continuing talks for an eventual agreement – all 3 to keep the EUR from maintaining the upside bias with clear conviction. That said, we are in a market which is getting used to brushing aside key risk factors, and the early Asian response is usually tempered to some degree by the more liquid London markets – as we saw with GBP the previous weekend!

This post was published at Zero Hedge on Nov 20, 2017.

How Corporate Zombies Are Threatening The Eurozone Economy

The recovery in Eurozone growth has become part of the synchronised global growth narrative that most investors are relying on to deliver further gains in equities as we head into 2018. However, the ‘Zombification’ of a chunk of the Eurozone’s corporate sector is not only a major unaddressed structural problem, but it’s getting worse, especially in…you guessed it… Italy and Spain. According to the WSJ.
The Bank for International Settlements, the Basel-based central bank for central banks, defines a zombie as any firm which is at least 10 years old, publicly traded and has interest expenses that exceed the company’s earnings before interest and taxes. Other organizations use different criteria. About 10% of the companies in six eurozone countries, including France, Germany, Italy and Spain are zombies, according to the central bank’s latest data. The percentage is up sharply from 5.5% in 2007. In Italy and Spain, the percentage of zombie companies has tripled since 2007, the Organization for Economic Cooperation and Development estimated in January. Italy’s zombies employed about 10% of all workers and gobbled up nearly 20% of all the capital invested in 2013, the latest year for which figures are available. The WSJ explains how the ECB’s negative interest rate policy and corporate bond buying are keeping a chunk of the corporate sector, especially in southern Europe on life support. In some cases, even the life support of low rates and debt restructuring is not preventing further deterioration in their metrics. These are the true ‘Zombie’ companies who will probably never come back from being ‘undead’, i.e. technically dead but still animate. Belatedly, there is some realisation of the risks.

This post was published at Zero Hedge on Nov 17, 2017.

Millions Of Millennials Could Be Trading Sex For Their Next Debt Payment – Here’s How

As the storm clouds of peak stupidity gather over the heads of the millennial generation who were conned by banks, government, and universities to take out excessive amounts of leverage in auto loans, credit cards, and student debt; millions have flocked to a new website seeking ‘Sugar Daddies’ and or even ‘Sugar Mommies’ to pay off their debt amid an economic environment where wage growth remains non-existent.
Today’s real simple get-out-of-debt option for the broke college/post college millennial is through an unconventional dating website called SeekingArrangement.com.
In 2016, the website identified some 2.5 million college students who turned to the site in an act of desperation to find a ‘Sugar Daddy’ or even a ‘Sugar Mommy’ in exchange of personal time for straight cash.
The website’s mission is to ‘delivers a new way for relationships to form and grow. Sugar Babies and Sugar Daddies or Mommas both get what they want, when they want it’.
We find it hard to believe the intention of the website, when created by MIT graduate Brandon Wade in 2006, was to have 25% of the 10 million users – broke college millennials.
According to Business Insider,
A couple years ago, the site noticed an uptick in the number of members signing up with a university email address, Alexis Germany, a spokesperson for SeekingArrangement.com, told Business Insider.

This post was published at Zero Hedge on Nov 15, 2017.

Looking For Inflation In All The Wrong Places

A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, ‘this is where the light is’. – The Streetlight Effect
The drunk in the above story is an idiot, of course. But no more so than modern economists who can’t find inflation because they’re looking only at the part of the economy covered by their government’s Consumer Price Index.
But gradually, grudgingly, a handful of mainstream economists do seem to be figuring out that the soaring value of stocks, bonds, real estate, fine art, collectibles and cryptocurrencies is a legitimate sign of a depreciating currency and future instability. Inflation, in other words. From yesterday’s Morningstar:
Lack of inflation is a global issue
(Morningstar) – The lack of inflation is a global issue. Unemployment is at cyclical lows in the US, Germany, and Japan, yet in each of these countries there is only small evidence that wages are picking up. No doubt globalisation and technology are common factors that have helped constrain wages across countries.

This post was published at DollarCollapse on NOVEMBER 14, 2017.

Comex Gold Sees ‘Another Large Sell’ as Bullish Silver Betting Grows to 7-Week High

COMEX gold contracts recovered a $5 drop against a weakening US Dollar in London lunchtime trade Tuesday, rising back to last week’s finish at $1275 after what analysts called another “large sell” order on the futures market.
Commodities retreated and bond prices edged higher as world stock markets fell again.
Germany’s Dax dropped for the fourth session running after the 19-nation Eurozone released a raft of stronger economic data, led by 2.5% annual GDP growth across the region for the third quarter of the year.
“Speculative financial investors stopped withdrawing from gold and built up net long positions again in the week to 7 November,” says German financial group Commerzbank in a commodities note today, looking at the latest Comex gold derivatives data from US regulator the CFTC.

This post was published at FinancialSense on 11/14/2017.

US Futures, Global Stocks Extend Decline After Disappointing Chinese Data, Dollar Slides

U. S. index futures declined for the second day in a row, dipping 0.1% to the lowest in more than a week following declines in Asian and European shares. European stocks tried and failed to shrug off the negative sentiment that spurred broad-based declines in Asia following another month of disappointing Chinese macro data…

… eventually reversing gains as the euro strengthened on German growth data. The euro was up a fifth day, rising above 1.1700 for the first time in nearly three weeks after data showed that German GDP was on track for its best year since 2011, forcing Europe’s Stoxx 600 Index to retreat. The U. K.’s FTSE 100 Index jumped 0.1 percent, while Germany’s DAX Index gained less than 0.05%.
Mining companies led the drop, with many commodity prices also falling in the wake of data showing China’s economy moderating. That also weighed on Asian equity gauges, though the Nikkei closed little changed after dropping for four days. The yield on China’s 10-year debt briefly breached 4 percent for the first time in more than three years. China’s CSI300 Index slid as much as 1%, its biggest intraday drop this month, as tech shares lead decline. Sanan Optoelectronics Co. slumps 7% to pace declines on the CSI300 Index; Unigroup Guoxin Co. -5.2% as second-worst performer.

This post was published at Zero Hedge on Nov 14, 2017.

Visualizing The Rapidly Aging Western World

From issues such as declining fertility rates to the ongoing complications resulting from China’s famous ‘One Child Policy’, there are many demographic challenges that the world must grapple with in the coming years.
However, Visual Capitalist’s Jeff Desjardins notes one problem of particular importance – at least in places like Europe and the Americas – is a rapidly aging population. As the population shifts grayer, potential consequences include higher dependency ratios, rising healthcare costs, and shifting economies and cities.
EUROPE: A PRIME EXAMPLE We’ve discussed Germany’s demographic cliff before, but it’s not only Germany that will be impacted by a rapidly aging population.

This post was published at Zero Hedge on Nov 11, 2017.

Doug Noland: “Money” on the Move

This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
It’s been awhile since I’ve used this terminology. But global markets this week recalled the old ‘Bubble in Search of a Pin.’ It’s too early of course to call an end to the great global financial Bubble. But suddenly, right when everything looked so wonderful, there are indication of ‘Money’ on the Move. And the issue appears to go beyond delays in implementing U. S. corporate tax cuts.
The S&P500 declined only 0.2%, ending eight consecutive weekly gains. But the more dramatic moves were elsewhere. Big European equities rallies reversed abruptly. Germany’s DAX index traded up to an all-time high 13,526 in early Tuesday trading before reversing course and sinking 2.9% to end the week at 13,127. France’s CAC40 index opened Tuesday at the high since January 2008, only to reverse and close the week down 2.5%. Italy’s MIB Index traded as high as 23,133 Tuesday before sinking 2.5% to end the week at 22,561. Similarly, Spain’s IBEX index rose to 10,376 and then dropped 2.7% to close Friday’s session at 10,093.
Having risen better than 20% since early September, Japanese equities have been in speculative blow-off mode. After trading to a 26-year high of 23,382 inter-day on Thursday, Japan’s Nikkei 225 index sank as much as 859 points, or 3.6%, in afternoon trading. The dollar/yen rose to an eight-month high 114.73 Monday and then ended the week lower at 113.53. From Tokyo to New York, banks were hammered this week.

This post was published at Wall Street Examiner by Doug Noland ‘ November 11, 2017.

The Ponzi scheme that’s more than 100x the size of Bernie Madoff

By January 1920, much of Europe was in total chaos following the end of the first World War.
Unemployment soared and steep inflation was setting in across Spain, Italy, Germany, etc.
But an Italian-American businessman who was living in Boston noticed a unique opportunity amid all of that devastation.
He realized that he could buy pre-paid international postage coupons in Europe at dirt-cheap prices, and then resell them in the United States at a hefty profit.
After pitching the idea to a few investors, he raised a total of $1,800 and formed a new company that month – the Securities Exchange Company.
Early investors were rewarded handsomely; within a month they had already received a large return on investment.
Word began to spread, and soon money came pouring in from dozens, then hundreds of other investors.

This post was published at Sovereign Man on November 10, 2017.

Bill Blain: “The UK Vs Europe, The Best Comedy Show Ever!”

The UK vs Europe, the best comedy show ever!
‘Hold tight, wait till the party’s over, hold tight, we’re in for nasty weather…’
You really can’t make this stuff up. Get out the blunted spoons as the EU demands UK pays to play or forget a December start to real talks. The UK government in disarray. Global investors shaking their heads asking WTF and getting a bit bored and disinterested by it.
It could be a top class comedy.
Imagine the scene… A wood panelled office in Downing Street; Theresa Maybemight is trying to rebalance her cabinet. After carelessly losing a remainer last week, she has to sack a Brexiteer this week. Howls of hysterical studio laughter as cosmic balance is restored by chucking another one to the wolves.. Till tomorrow… as a blonde chubby bloke winks to camera…
Back in Brussells (actually Berlin, cos let’s be honest about it) a group of German experts have reviewed the situation and concluded Brexit might be bad for Germany (in comedy German accents) so therefore it can’t happen. End of discussion. Crashing minor chords. Their stooges in Brussels read out a demand for ‘One Gizillionbillion dollars’ in a passable Dr Evil impersonation (comedy Belgian accents) and give poor little Theresa six weeks to pay. Or else…

This post was published at Zero Hedge on Nov 9, 2017.

German Investors Now World’s Largest Gold Buyers

– German gold demand surges from 17 ton-a-year to a 100 ton-plus per year
– 6.8 Bln spent on German gold investment products in 2016, more per person than India and China
– Germans turned to gold during financial crises and ongoing euro debasement
– Evidence of latent retail demand on increased economic concerns
– ‘Gold fulfils an important long-term, wealth preservation role in German investors’ portfolios’

Editor: Mark O’Byrne
***
India and China often grab the headlines as the world’s largest buyers of gold. In 2016 this was not the case.
When measured on a per capita basis it is Germany that takes the impressive crown of largest gold buyer in 2016, all thanks to their investment market. Last year the country set a new personal best, ploughing as much as 6.8bn ($8 bn) into gold coins, bars and exchange-traded commodities (ETCs).

This post was published at Gold Core on November 6, 2017.

Scientists Look For A Cure For Politically Undesirable Behavior

Via GEFIRA,
The ‘Free World’ has taken on where the Soviet scientists and psychiatrists left off.
German and American scientists of renowned Universities in Bonn and Lbeck do research on treatment for politically undesirable behaviour like their Soviet colleagues from the infamous Serbsky Central Research Institute in Moscow. In the Soviet Union people who protested the system had to undergo psychiatric treatment.
Vladimir Bukovsky, a world-known dissident survived one and described it. The same will be the fate of the so called Free World’s citizens if they fail to conform to the idea of a multi-cultural society. The powers that be have given a signal, and obliging, complaisant scientists are already busy working on bettering our collective and individual psyche. Apart from homophobia and Islamophobia, xenophobia is another psychiatric condition that needs to undergo therapy…hormonal therapy.
Throughout history, the world has been torn by two opposing factors that face each other with daggers drawn. These are natural biological, and unnatural forces, or reality and dystopia. It is natural for a human being to want to possess things and work as little as possible; to counter it, dystopian socialists, communists or Christian heretics came up with an idea of a society governed by the principle: From each according to his ability, to each according to his needs.
It was supposed to work. And it failed miserably everywhere it was installed and implemented, from Cuba to East Germany, to the Soviet Union, to North Korea.

This post was published at Zero Hedge on Nov 3, 2017.

Dollar Rebounds, Futures Rise Ahead Of Surge In Payrolls

One day after the dollar slumped sharply on initial disappointment with the GOP tax plan, the greenback has rebounded ahead of a nonfarm payrolls report that is expected to show the US economy gained over 300,000 jobs in the post-hurricane rebound, and as investors reassessed the latest news on U. S. tax-cut plans. Stocks in Europe and Asia advanced, US equity futures were as usual in the green, while oil headed for an eight-month high on signs OPEC will agree to extend supply cuts.
In an otherwise quiet session, the biggest overnight news was President Nicolas Maduro announcing Venezuela will seek to restructure its global debt after the state oil company makes one more payment. While the risk of contagion is low, the emerging-market index of currencies declined for the first time this week. In early trading, the PDVSA dollar bonds maturing 2027 plunged at the start of trading, slumping 10 cents on the dollar to 20 cents in early London trading. As a result, EMFX weakened across the board with some analysts noting the Venezuela debt restructuring as a driver, though most weakness occurred after Turkey’s inflation report.
In global macro, markets are in their usual pre-NFP lull, with most G-10 currencies staying within yesterday’s ranges. The weakest quarter for Australian retail sales in seven years sent the Aussie lower and bonds climbing. The Aussie dollar dropped as much as 0.5 percent back below 77 U. S. cents and bond yields extended declines as traders pushed back bets on the timing for an interest-rate increase. The Bloomberg Dollar Index was steady in Asia, amid modest moves in most G-10 currencies, before edging higher with the start of the London session as fast-money names added dollar longs before U. S. jobs report. Treasury futures were stuck in tight ranges through Asian hours, on very muted volumes, just 37% of recent averages, with cash markets closed for a Japan holiday; as Bloomberg reports, TSYs came under pressure in London, widening vs Germany.

This post was published at Zero Hedge on Nov 3, 2017.

Germany Also Engages in Political Prosecution

The Alternative for Germany party (AfD) in Germany has asked the Federal Government to file a lawsuit against all decisions of European Central Bank (ECB) regarding the purchase of government bonds and corporate bonds as well as derivatives since 2015. They are petitioning to file in the European Court of Justice asserting that the policies of the European Treaties and by the Federal Constitutional Court were being violated.
Effectively, the ECB ‘stimulus’ policy (QE) has completely failed and instead has become a life-support system subsidizing the debt of Eurozone member states. Even reducing the amount bought per month is an attempt to see if the marketplace takes up the debt. But the Eurozone governments never cut back spending or reformed. They never had to. The QE program was merely targeting to support the government – not the average person in the economy.

This post was published at Armstrong Economics on Nov 2, 2017.

Market Talk- October 31, 2017

A slow but steady day in Asian equity markets, but happy in the knowledge that the BOJ left almost everything unchanged. The Nikkei closed almost unchanged but has set an impressive two month rally. At above 22k the index closes at a 21 year high, but after the weak opening it took all day to recover unchanged. The Yen was a little weaker (0.5%) as it challenges the 114 handle again. The Australian ASX did open better but drifted throughout the day eventually closing on its low. However, irrespective of todays price action it has been a constructive month for the All Ords with a gain of around 3%. Shanghai managed to shake-off the PMI miss (51.6 against market expectations of 52), with Services also declining. In Hong Kong the Hang Seng we closed down -0.3% with bank stocks weighing on the market.
Although we finished the month on a positive note, volumes were low. This usually is the case when a large index is closed and with Germany on a national holiday the absence of the DAX was noticeable. Spain’s IBEX helped sentiment though with a daily gain of +0.7%. The market is valuing ‘no news’ as positive these days, so with the demand for yield ever present any quiet day is good for low grade paper. This is present when comparing global credits to the states where it is not uncommon to find BBB credits trading even yield with US treasuries. The CAC managed a small +0.2% gain whilst the largest bank (BNP Paribas) recorded as the worst performing European bank stock today (-2.7%). UK’s FTSE managed a small positive for the day but an +0.5% in the currency helped international investors as traders continue to price in a BOE move on Thursday. Talk is that BREXIT discussions may be progressing better than many had expected but we have yet to hear details.

This post was published at Armstrong Economics on Oct 31, 2017.

Germany Forced To Pay Consumers To Use More Electricity

A stormy weekend led to free electricity in Germany, as Bloomberg reports wind generation reached a record, forcing power producers to pay customers the most since Christmas 2012 to use electricity.
***
A stormy weekend led to free electricity in Germany, as Bloomberg reports wind generation reached a record, forcing power producers to pay customers the most since Christmas 2012 to use electricity.

This post was published at Zero Hedge on Nov 1, 2017.

This Energy Revolution Could Shrink Your Electric Bill to Zero

Happy Halloween. Whether you’ll get a trick or a treat is hard to know in this zombified economy.
Take negative interest rates. When Europe’s central banks pushed rates below zero, large depositors found themselves paying interest instead of receiving it.
But at the same time, some lucky homeowners found their mortgage payments turn into credits.
The weirdness continues. Last week, Bloomberg reported that German power producers would likely be paying customers to use electricity this weekend.
How does this possibly make sense?
The answer is in the wind.
Blown-Away Prices
Normally, utility companies calculate how much a kilowatt-hour of electricity will cost to produce and therefore, how much to charge the customers. That’s pretty easy to do with fossil fuels, but wind production – which Germany depends on heavily – can be volatile due to weather conditions. That means utilities must install extra renewable power capacity to meet demand in suboptimal conditions.

This post was published at Mauldin Economics on OCTOBER 31, 2017.

SWOT Analysis: What a Higher Budget Deficit Means For Gold

Strengths
The best performing precious metal for the week was palladium, down slightly by 0.42 percent. Germany’s BASF noted that the automotive industry appears to be responding to the price surge in palladium this year and are slowing down purchases. According to Bloomberg, gold traders and analysts are bearish for the first time in four weeks as the dollar strengthens. The passing of the U. S. budget by the Senate lifted hopes by boosting risk sentiment and pushing yields higher. Joni Teves of UBS says a large fiscal package is a key downside risk for gold as it would result in a higher policy rate path. Even though there has been a pullback in gold prices, large buy orders came into the market two times this week and spiked prices higher. On Monday, 18,1792 gold contracts were traded in a span of five minutes and on Wednesday another 21,129 contracts were traded. Tai Wong, head of base and precious metals trading at BMO Capital Markets, bets the dollar is going to retrace and it will be good for gold. Paul Wright, former CEO of Eldorado Gold Corp., will resign from his board position after 20 years at the company and just months after resigning as CEO. Although stock value tripled during his tenure, Wright’s late career was marked by a high-profile dispute with the Greek government after investing over $2 billion in the country. Following the results of the European Central Bank meeting, gold is seeing some selling pressure and trade surging after the dollar index rallied.

This post was published at GoldSeek on 30 October 2017.