Images From The Death Of China’s Rustbelt

As you might have noticed, China’s economic miracle has turned into a nightmare – and it’s dragging the entire world into one big, bad dream characterized by a deeply entrenched disinflationary impulse occasioned by the country’s acute overcapacity problem.
That’s not as complicated as it sounds. Put simply: China levered up massively (in part through the country’s sprawling shadow banking complex) following the crash and used that leverage to invest not only in industry, but even in urban monuments for the sake of urban monuments (the now famous Chinese ‘ghost cities’).
But that’s all changed now. The global economy never recovered from the crisis. Global demand slumped and never truly recovered to pre crisis levels. In a related, but even more disturbing fact for China, global trade growth has advanced more slowly than global output for three years running. Before this recent stretch, the last time that was the case was 1985.

This post was published at Zero Hedge on 03/06/2016.

“We’re In The Eye Of The Storm” Rothschild Fears “Daunting Litany” Of Problems Ahead

As central bank policy-makers’ forecasts have become more pessimistic (i.e. more realistic), Lord Rothschild is unsurprised at the current malaise: “not surprisingly, market conditions have deteriorated further…So much so that the wind is certainly not behind us; indeed we may well be in the eye of a storm.” On this basis, Rothschild highlights a “daunting litany of problems,” warning those who are optimistically sanguine about the US economy that “2016 is likely to turn out to be more difficult than the second half of 2015.”
Lord Rothschild Letter to Investors (via RIT Capital):

This post was published at Zero Hedge on 03/06/2016.

Turd on Crush The Street

Recorded last Thursday, this interview with Ken Ameduri of Crush The Street turned out quite well. I think you’ll enjoy listening.
Among the topics Ken and I discussed:
there is no “stock market”, instead just HFT computers trading against each other how the primary algo pair, the USDJPY, affects nearly everything that “trades” the genesis of the 2016 rally in gold and silver and where prices may head from here why silver has failed to rise in price at the same rate as gold Again, this interview flowed pretty well and covered many of the topics we address here on a daily basis. I encourage you to give it a listen and then pass the YouTube link along to your distribution list.

This post was published at TF Metals Report on March 6, 2016.

Former Reagan Advisor: Congress Just ‘Hatcheted’ Your Social Security Benefits

While it went virtually unnoticed, Section 831 of the House’s new budget bill could radically change your Social Security benefits as soon as May 1.
This change will affect the benefits that as many as 21.3 million Americans could be eligible for, instantly.
It could change your chosen retirement date.
It could change the way you vacation.
It could change your entire financial future…

This post was published at Wall Street Examiner by Money Morning Staff Reports ‘ March 4, 2016.

The Economics of Hunting and Species Conservation

Remember Cecil the Lion? It was a lion who was hunted and killed in Zimbabwe last year, and when photos of the dead lion appeared on line, scores of first-world suburban white people cried out in anguish that a cute big cat was killed.
Well, according to the UK Telegraph, the backlash over Cecil may have reduced hunting in the region. But, as anyone familiar with how wildlife economics works, that hasn’t saved any lions from death. It simply now means those lions must be culled by other means. That is, unless they’re hunted down by wildlife management agents in the area, they’ll die by some other, more painful, means. The conservancies simply can’t handle the high cost of maintaining the larger lion population:
Bubye Valley Conservancy has more than 500 lions, the largest number in Zimbabwe’s diminishing wildlife areas. It has warned that its lion population has become unsustainable and that it may even have to cull around 200 as a result of what is being called ‘the Cecil effect’. Now Bubye is appealing for other institutions or wildlife sanctuaries to take some of its lions.
We can’t blame anti-hunting efforts for everything, though. A worsening global economy, and a decline in oil prices has kept rich oilmen and other wealthy hunters away from trophy hunting . This means that the economic infrastructure that keeps these species alive has been weakening, with predictable effects.

This post was published at Ludwig von Mises Institute on MARCH 3, 2016.

The Unintended Consequences Of Greenspan’s “Frankenstein” Markets

It is common knowledge by now that Federal Reserve Chairman Alan Greenspan oversaw, enabled and approved of, a major transition in the US economy. His infamous ‘Greenspan-put’ in which his actions at the central bank would be driven, if not dictated, by the whims of financial markets, clearly led to higher asset prices. Investors obviously picked up on the strong bias in the Greenspan-Fed’s conduct of monetary policy as they slashed rates at the tiniest hiccup in financial markets, and kept them at low levels for much longer than what would be considered prudent by former administrations. Following markets on the escalator up and taking the elevator down together set a precedent that created a Frankenstein monster, which socialised losses through the printing press while privatizing profits. Such a system was and still is unsustainable as it more or less ensures valuations decouple from underlying fundamentals.
The monetary system in place since the gold-exchange standard that emerged from the rubble of WWI clearly favours inflation over deflation, so we should expect values expressed in money to have an upward trend imbedded in them. However, a stable system would see nominal valuations rise more or less in tandem. In other words, we would expect a balanced sustainable system to see the price of apples, S&P500, cars, commodities and GDP grow more or less at the same pace.
Note, we are not saying certain markets will never experience idiosyncratic price movements due to their own peculiarities as driven by shifts in supply or demand. On the contrary, shifts inrelative prices are the one thing that make a capitalistic system stable over the long run. What we are saying though is that the upward trend in prices is due to a diminution of the value of money per se , driven by the inherent inflationary bias in monetary policy execution. With stable money, relative prices would change, but not the overall price level. This is important, as any comparative analysis of the pre-Greenspan era versus recent past must take into account the fact that prices do rise, relentlessly. We must thus examine financial asset valuations in relation to other markets to understand what the Greenspan put mean.

This post was published at Zero Hedge on 03/06/2016.

Peak Oil Squeeze? Hedgies Capitulate On Bearish Oil Bets

Hedge Funds covered their short oil bets by the most in 11 months last week. CFTC data shows managed-money short positions dropped 25,639 contracts last week, sustaining a 26% rally off February lows. In April 2015, WTI rallied over 20% off its lows amid the same short-covering squeeze, only to collapse 40% in the next 3 months (despite OPEC hope and calls for stability). Oil ETF shorts have also capitulated back to “normal” long-short ratios suggesting oil has seen “peak” short-covering.
Futures shorts covering in size…

This post was published at Zero Hedge on 03/06/2016.

Are Greek Banks About To Charge For The Privilege Of Banning 500 Bills?

Officials would have you believe that all of this talk about banning cash is nonsense – a myth likely perpetuated by fringe bloggers or else by Austrian economists in the early stages of dementia.
The problem, however, is that we get more signs that cash is on the way out each and every day.
Take Larry Summers, who reckons it might be time to get rid of the $100 note in order to ‘make the world a better place’ (the idea being that only criminals transact in high denomination notes). There’s also Citi’s Willem Buiter, and the German Council of ‘Experts’ Peter Bofinger, and Harvard’s Kenneth Rogoff, and the list goes on. In fact, just yesterday we learned that Sweden will likely be completely cashless in the short space of 5 years.
As mentioned above, there’s always this amorphous notion of fighting crime built in there somehow as if the world’s central banks recently adopted a Batman mandate to go along with price stability, but the real reason is, and always will be, simple: controlling citizens’ economic decisions. Or, put a little more harshly: stripping depositors of their economic autonomy.

This post was published at Zero Hedge on 03/06/2016.

Cash, Guns And Safes: Stress Is Spreading

The Bank For International Settlements just released a report stating that the spread of negative interest rates hasn’t caused the world to end. From this morning’s Bloomberg:
Negative Interest Rates Are Working Just Fine So Far: BIS Negative interest-rate policies currently in use by central banks around the world have worked through their respective systems in much the same way as positive rates, though it’s not known how far below zero that would continue to be the case, the Bank for International Settlements said. In its quarterly report published Sunday, the Basel-based ‘central bank for central banks’ said that ‘so far, zero has not proved to be a technically binding lower limit for central bank policy rates.’
The BIS’s verdict on negative rates gives backing to the European Central Bank, the Bank of Japan and others at a time when such unconventional methods are facing increasing criticism for their potential impact on the financial industry and currency markets. A sell-off in European bank stocks this year was partly driven by fears that further rate cuts by the ECB would damage profitability in a sector still recovering from the debt crisis.

This post was published at DollarCollapse on March 6, 2016.

‘They Spent It All On Hookers, Blow And Fancy Toys’ – Hedge Fund Manager Predicts Lower Oil For Longer, Quantitative Easing For The People, And A Gold Bull Market

In 2011, as gold prices rocketed to $1900 and oil was trading above $120 a barrel, there were few analysts who saw anything but further gains. But Marin Katusa ofKatusa Research had a different opinion. At a major commodity conference Katusa, to boos and jeers from the audience, held strong to his analysis that an imminent deflationary collapse in commodity prices was on the horizon. And collapse they did.
According to Katusa, who is closely involved in the Canadian resource sector, most people simply assumed the good times would go on forever… because it was different this time. But like any uninhibited party fueled by unlimited cash, the hangover was sure to follow.
There’s no doubt you had massive high paying jobs. In Canada, the province that benefited the most is Alberta… In the last twelve months they’ve had 70,000 layoffs of jobs paying over a hundred grand a year.
…when I’d go to these oil towns you’d sit down at the casinos with them and these guys were all about the hookers and blow… they were all about their toys… big fancy trucks… snow mobiles… and they’re in the field for two weeks and they make $20,000 and blow it all at the casinos.
You knew it couldn’t last.

This post was published at shtfplan on March 6th, 2016.

Dude, Where’s My Recovery?

Happily we see that Anthony Sanders has found a new vehicle for his highly informative column, Confounded Interest, in case you wish to bookmark it.
The failure of the Fed and the regulators and the Solons of government is not terribly complex. What else would one expect if you address the symptoms badly, and do little or nothing to fix the very crux of the problem?
John Kenneth Galbraith said it quite succinctly some years ago. ‘Trickle-down theory – the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.’
It is like sending billions in aid to a corrupt, Third World nation, where little of what is sent actually makes it to the people for whom it is intended.
It is not the stimulus or the principle behind it that is discredited. What we have had is not the kind of stimulus designed to kick start aggregate demand. It has been the sustaining of the status quo, the continuation of a major policy error and widespread financial fraud, resulting in an asset bubble collapse and ongoing financial malaise.

This post was published at Jesses Crossroads Cafe on 06 MARCH 2016.

JPM’s Head Quant Explains Who Unleashed The S&P Rally, And What May Happen Next

Yesterday, when reading the latest note by JPM’s “Gandalf” head quant Marko Kolanovic, we noted something strange: for the first time we observed a JPM quant not only commenting on such sensitive topics as social fairness, but daring to challenge the oligarch orthodoxy implying that Buffett is wrong that “the babies being born in America today are the luckiest crop in history.”
This is what he said:
While we do not take either a glass half-full or glass half-empty view on the current state of US economy, there are good reasons to believe that ‘the luckiest generation in history’ statement is overly optimistic. US primary results show a very strong lead for D. Trump in the Republican Party, and a surprisingly good showing for B. Sanders. We believe this indicates that a significant part of the electorate disapproves of the current political establishment and feels left behind by the new economy (e.g. voters may not agree with W. Buffet that an average upper-middle class American today has a better living standard as compared to John D. Rockefeller Sr.).
Since the opinion of Kolanovic’s boss Jamie Dimon – if only that for public purposes – is largely a carbon copy of Buffett’s, we hope this rare statement of truth from a banker does not cost Kolanovic his job, especially since his uncanny insight and abilities to time market inflection points have made him almost as invaluable to stock pickers as Gartman (the latter, by batting a solid 0.000, is arguably the most irreplaceable voice on Wall Street today).

This post was published at Zero Hedge on 03/06/2016.

Ever Curious-er (and Bigger) Revisions of Depressing US Trade Figures

As usual, whenever the monthly U. S. jobs reports and the monthly U. S. trade reports come out on the same day, the latter get overshadowed. Partly this is because the trade data is released with a two-month time lag, versus one month for employment. But it’s also partly because, despite all the paeans offered to globalization and its blessings by the political, business, and media establishments, the trade figures have become so depressing that they’re considered best neglected in hopes that Main Street won’t notice.
So chances are you haven’t yet read or heard that the overall January trade shortfall increased 2.19 percent on month, from $44.70 billion to $45.68 billion. Or that this January combined goods and services deficit was the highest since August’s $50.54 billion. These figures aren’t adjusted for inflation, so it’s tough to tell exactly how much of a drag on economic growth they’ll produce, but all the signs keep pointing to one that will keep getting bigger and bigger.
Also noteworthy: That portion of the trade deficit most heavily influenced by trade deals and related trade policies – the non-oil goods deficit – also hit its highest level in pre-inflation terms ($57.76 billion) since August ($59.29 billion). So did its inflation-adjusted counterpart.

This post was published at Wall Street Examiner by Alan Tonelson ‘ March 4, 2016.

The Container Ship Curse?

The world’s largest container ship just entered a US port. Just in time for record low levels in the Baltic Dry Shipping Index, which is a measure of how much ships can charge. This is a classic case of how artificially low interest rates, globally, creates malinvestments, deflation, and eventually bankruptcies.
According to an article in the Daily Mail:

This post was published at Ludwig von Mises Institute on MARCH 4, 2016.

My letter to the Philadelphia Inquirer re: mayor wants to impose soda tax

Re: Mayor Kenney: Soda tax would fund $400 million in projects
Dear Sir:
Philadelphia Mayor Kenney joins the too-long list of economically ignorant politicians. One begins to wonder whether ignorance of basic economics is a prerequisite for running for elected office. Gee, I didn’t think I would ever say this, but I agree with the Teamsters; i.e., the three cent per ounce tax on sodas will destroy jobs. Has the mayor really not considered that money spent on a soda tax will NOT be spent elsewhere? Let’s suppose that the people spend the same total dollars, including the new tax, to buy sodas as in the past. The revenue to the soda-providing industry will go down, because the tax comes off the top, and the number of units of sodas sold will be less. Got that?

This post was published at Mises Canada on MARCH 1, 2016.

Do Not Show These 4 Charts To Ben Bernanke

It’s probably safe to say that most central bankers aren’t particularly enamored with the idea that post-crisis monetary policy has contributed to rising income inequality.
Take Ben Bernanke for instance, who took a few moments away from advising Citadel and PIMCO last year to throw on his blogger Ben hat and explain why he and his ‘courage’ aren’t responsible for the widening gap between the rich and the poor.
‘First, widening inequality is a very long-term trend, one that has been decades in the making,’ he explained. ‘The degree of inequality we see today is primarily the result of deep structural changes in our economy that have taken place over many years, [and by] comparison, the effects of monetary policy on inequality are almost certainly modest and transient,” he added.

This post was published at Zero Hedge on 03/06/2016.

US Labor Market Still Weak After Trillions In Stimulus (Dude, Where’s My Recovery?)

As I pointed out on Friday, the US jobs market had a fine print in terms of quantity of jobs added, not quality. 80% of jobs added were of the low-wage variety.
And two employment indicators show that the US economy is back … to the worst levels prior to 2008. Both U-6 underemployment (total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force) and the employment-to-population ratio still remain grim.

Despite the massive fiscal and monetary stimulus (ZIRP and QE 1-3) thrown at the employment problem.

This post was published at Wall Street Examiner by Anthony B. Sanders ‘ March 6, 2016.

Central Banks Out of Bullets: THE GOLD BULL IS BACK!

The following video was published by on Mar 6, 2016
The multi-year bear market for gold and silver mining stocks appears to be coming to an abrupt end as gold breaks important resistance. The GDX mining stocks ETF has moved from $12 to over $19 in less than two months. As we re-enter a GLOBAL gold bull market, smart money appears to be leveraging rising gold and silver prices through the precious metals mining company stocks. Amir Adnani, the founder and Chairman of Brazil Resources joins me to discuss his outlook for the precious metals mining sector and global economy. About the central bankers Adnani says “They’re out of bullets.” As the result of negative interest rates and endless fiat money printing, people are quickly turning back to real money, gold. Adnani believes we are at the very beginning of an historic gold bull market, the likes of which the world has never seen.

Key Equity Index Climbs Back Up The Elevator Shaft

The Value Line Geometric Composite, which broke critical support in early January leading to an immediate 12% drop, has climbed all the way back to the breakdown level.
The Risk Model that orients our investment posture utilizes market inputs other than simply price in its construction. However, if we were to choose one price plot to guide our investment decisions, it would most certainly be the Value Line Geometric Composite (VLG). The VLG, as we have explained many times in these pages, is an unweighted average of approximately 1700 stocks. Thus, in our view, it serves as the best representation of the true state of the U. S. equity market. It has also historically been very true to technical analysis and charting techniques which is quite remarkable considering there are no tradeable vehicles based on it. And it has been remarkably accurate of late in offering guideposts for trading this market – something to keep in mind based the current level of the VLG.
Consider some of our posts this year focusing on the VLG:

This post was published at Zero Hedge on 03/06/2016.