Tag: finance

When will the U.S. labor market start to accelerate?  That is the single most critical question for global capital markets, for it speaks directly to both economic growth and Federal Reserve monetary policy.  But, as ConvergEx’s Nick Colas notes, just as important, however, is the question “Where do people actually want to work?”

Via ConvergEx’s Nick Colas,

In today’s note we address both topics with a range of Google Trends analysis, looking at what both employers and prospective employees plug into the ubiquitous online search engine.  Key conclusions: there is no evidence of any faster pace of hiring, and the trend of hiring part time labor over full time is both strong (a 3:1 ratio) and accelerating.  As far as where online interest in available jobs runs deepest, Google outpaces Facebook and Apple by over 2:1, but interest in working at Twitter just surpassed searches for “Work at Microsoft”.  Stock markets clearly guide how a society allocates its intellectual capital, perhaps more than historical experience would indicate.

The good times in U.S. equities – and many other global stock markets – are undeniable, but it will be time to worry again soon enough.  Rallies – such as the one we’re seeing at the moment – create future obligations.  In this case, the +23% return for 2013, plus whatever we tack on between now and the end of the year, is essentially a promise of good news to come.  Markets discount the prevailing view for growth in the economy and corporate earnings.  And right now, the market weatherman is calling for sunny skies and fair weather for 2014.

The linchpin issue for global stock returns in 2014 centers on one group of people: the 11.3 million unemployed workers in the United States.  That isn’t to dismiss those suffering from unemployment in Europe, for example, or elsewhere in the world.  That 4.5% of the U.S. adult non-institutionalized population does, however play a critical role in the future returns for stocks globally.  Here is why:

U.S. labor markets have been stuck in first gear since 2011, generating an average of only 170-180,000 jobs over the past 12 months.  After natural population growth (100,000/month) that means only 70-80,000 jobs added, or 0.05% of the population.

 

The Federal Reserve has tried to juice the economy with Quantitative Easing, pushing capital into the financial system by buying Treasury and mortgage backed bonds.  That has kept interest rates low, spurred the purchase of autos and homes, and helped give the U.S. the limited employment growth we mentioned above.

 

The ebbs and flows of the Fed’s commentary regarding QE – its ongoing duration and amount – have become heavily correlated with global equity returns.  You don’t have to look any further than the June Fed press conference or the last FOMC meeting to prove that.  Chatter about “Tapering” the QE program causes a pullback, while confidence that it will continue lifts risk assets higher.  I am sure you can find academics or market watchers who will tell you this is just ‘Correlation’ and not ‘causation’.  Feel free to listen to them, but don’t invest with them.  Ever.

 

Given the anemic October employment report, the recent government shutdown, and concerns over the U.S. consumer, it seems unlikely the Federal Reserve will reduce its bond buying until 2014.  That leaves stocks to rally into the end of the year.  Easy peasy, right?

 

But then what?  The U.S. economy and public companies will have to deliver on the implicit promise of record high stock prices with a combination of faster economic growth and better earnings.  The connective tissue between those aspirations is incremental domestic job growth.

 

Can’t the Fed just keep lifting stocks higher with more QE, regardless of where the U.S. economy ends up?  They can try, but there has been enough reporting on the opinions of the members of the Federal Open Market Committee for us to know that the Fed is growing concerned over the chance for a bubble in risk assets, including stocks.  The world gives the U.S. a lot of collective slack because of its reserve currency status, but everything has a limit.  As the Fed approaches a $4 trillion balance sheet ($3.8 trillion as of October 13, or 24% of GDP), policymakers know they are closer to the end of QE than the beginning.

 

That might all sound like bad news – QE is coming to an end, watch out below! – but it also makes U.S. stocks essentially a one-decision asset class.  Job growth here simply has to get better.  Maybe not today, maybe not tomorrow, but soon, and for the rest of our lives (spurious Casablanca quote there).

With that in mind, we turned to Google’s Trends product to give us a sense of where the U.S. labor market is heading.  This free service allows you to see how many people have searched for a given phrase back to 2005 and also compare those search tallies with other phrases.  With a global search market share of 67%, Google is as clear a window onto the soul of society as you will likely ever find.  And, therefore, a good window into the soul of employer and employee alike.

Here’s what we found:

Search terms: “Hire workers” and “Fire workers”.  Figuring that employers would search terms like “Hire” and “Fire” more than workers, we started with these simply keywords.  More “Hires”
than “Fires” entered into the Google search box would be a good sign of hiring to come.

 

The Trends data supports that the U.S. jobs market is improving – “Hire workers” gets more searches than “Fire workers” and has since the beginning of 2011.  The two still move closely together, however, indicating that there is little momentum in American labor markets.

 

Search terms: “Hiring part time” and “Hiring full time”.  As of the most recent Jobs Report, 7.9 million Americans are stuck working part time when they would prefer to have full time employment.  Department of Labor statistics show that the increasing reason for this “Part time recovery” is that these individuals could only find part time work, rather than being put on a part time schedule by their employer due to slack demand.

 

The Google Trends data shows the magnitude of the problem: searches for the phrase “Hiring part time” outnumber “Hiring full time” by 3:1.  Google Trends allows you to see which U.S. states have the greatest number of searches for each term.  The best states for “Full time hiring”: Texas, Missouri, North Carolina, and Georgia.  “Hiring part time” is popular in South Carolina, Kentucky, and Alabama.

 

Simply put, there is a lot more interest on the part of employers to advertise part time jobs than full time employment, and the gap between the two is growing.  Part time employment may serve to reduce the unemployment rate, but it will do less to improve consumer spending or confidence.

 

Search term: “Jobs for seniors”.  If you want to see growth in the U.S. labor market, just focus on the AARP set.  Those workers 55 and older have roped in the lion’s share of the jobs in the last year – 962,000 of th
e 1.3 million total positions added since September 2013.

 

Older Americans were early to the employment party in the current anemic economic recover, knowing that they would need to work even as they hit their golden years.  The Trends data for “Jobs for Seniors” shows a distinct pickup in 2009 and has stayed at these elevated levels since then.  Top states for the senior job search set?   Ohio, Arizona, and (of course) Florida.

 

Search terms: “Jobs at Microsoft” and “Jobs at Twitter”.  The Google Trends data is also useful for examining where people want to work.  Microsoft, for example, has been a popular employment search-related query on Google since 2005, when the data begins.  Twitter’s impending IPO has, for the moment, made the social media company a hotter employment ticket, however.    The ratio of searches for employment at Twitter as compared to Microsoft was 75:60 last month.

 

Search terms: “Jobs at Google”, “Jobs at Facebook” and “Jobs at Apple.”  Between these three, the number of queries by people search employment at landmark tech companies skews heavily to Google.  Interestingly, this is not a new phenomenon.  All the way back to 2005, the search engine company received multiple more interest in employment opportunities than either Facebook or Apple.  The ratio even now is still healthily in Google’s favor: a Trends score of 71 for Google, versus 24 for Facebook and 21 for Apple.

In summary, we see two trends in this data:

U.S. stocks are getting a free pass as we close out 2013, lifted by performance chasing at the end of a strong year and little threat of Federal Reserve tapering.  At the same time, 2014 is going to have to deliver some actual employment growth to support elevated stock prices.  We don’t see any sign of that in the Google data.

 

As far as where people want to work, stock market chatter does seem to have an impact.  It is easy to say that this is just performance chasing as well, with the hopes of easy millions from options and stock grants.  Still, it also shows that equity markets influence where a society’s intellectual capital chooses to hang its collective hat. 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/hfBZqBLv5fM/story01.htm Tyler Durden

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THE RAVEN (Debts No More)
(Edgar Allen Poe, The Raven)
WilliamBanzai7

Once upon a midnight dreary, while insolvent weak and weary,
O’r a balance sheet covered in a cloud of debts galore,
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
`’Tis some visitor,’ I muttered, `tapping at my chamber door –
Only this, and nothing more.’

Ah, distinctly I remember it was bleak as Lehman’s September,
And each despicable creditor wrought its ghost upon the floor.
Eagerly I wished the morrow; – vainly I sought more to borrow
From my books surcease of sorrow – sorrow for the abundant days of yore –
And the rare and hidden debts of toxic bailout whores –
Nameless here for evermore.

And the silken sad uncertain rustling of each indentured debt just
Thrilled me – thrilled me with fantastic plastic Sino-crap never bought before;
So that now, to still the beating of my heart, I stood repeating
‘Tis some banksta entreating entrance at my chamber door –
My late payments entreating his entrance at my chamber door; –
This it is, and nothing more,’

Presently my soul grew stronger; hesitating then no longer,
`Sir,’ said I, `or Madam, truly your debt forgiveness I implore;
But the fact is I was napping, and so gently you came rapping,
And so faintly you came tapping, tapping at my chamber door,
That I scarce was sure I heard you’ – here I opened wide the door; –
Darkness there, and nothing more.

Deep into that darkness peering, long I stood there wondering, fearing,
Doubting, dreaming dreams no debt bloated mortal ever dared to dream before;
But the silence was unbroken, and the darkness gave no token,
And the only word there spoken was the whispered word, `Debts No More!’
This I whispered, and an echo murmured back the word, `Debts No More!’
Merely this and nothing more.

Back into the chamber turning, my bankrupt soul within me burning,
Soon again I heard a tapping somewhat louder than before.
`Surely,’ said I, `surely that is something at my window lattice;
Let me see then, what thereat is, and this mystery explore –
Let my heart be still a moment and this mystery explore; –
‘Tis the wind of regretted debts and nothing more!’

Open here I flung the shutter, when, with many a flirt and flutter,
In there stepped a stately raven of the saintly solvent days of yore.
Not the least obeisance made he; not a minute stopped or stayed he;
But, with mien of lord or lady, perched above my chamber door –
Perched upon a bust of Subprime Croesus just above my chamber door –
Perched, and sat, and nothing more.

Then this ebony bird beguiling my sad fancy into smiling,
By the grave and stern decorum of the counterclaim it wore,
`Though thy crest be shorn and shaven, thou,’ I said, `art sure no Wall Street schemer.
Ghastly grim and ancient raven wandering in my open chamber –
Tell me what unlordly crime now comes from those Wall Street whores!’
Quoth the raven, `Debts No More!’

Much I marvelled this ungainly fowl to hear discourse so plainly,
Though its answer little meaning – little relevancy bore;
For we cannot help agreeing that no insolvent human being
Ever yet was blessed with seeing bird above his chamber door –
Bird or beast above the sculptured bust above his chamber door,
With such name as `Debts No More.’

But the raven, sitting lonely on the placid bust, spoke only,
Those simple words, as if his soul in that one phrase he did outpour.
Nothing further then he uttered – not a feather then he fluttered –
Till I scarcely more than muttered `Other friends have drowned in debt before –
On the morrow he will leave me, as my hopes have flown before.’
Then again the bird said, `Debts No More.’

Startled at the stillness broken by reply so aptly spoken,
`Doubtless,’ said I, `what it utters is its only stock and store,
Caught from some unhappy master whom financial disaster
Followed fast and followed faster till his songs one burden bore –
Till the dirges of his hope that melancholy burden bore
Of “Debts No More.”‘

But the raven still beguiling all my bankrupt soul to smiling,
Straight I wheeled a cushioned seat in front of bird and bust and door;
Then, upon the velvet sinking, I betook myself to linking
Fancy unto fancy, thinking what this ominous bird of yore –
What this grim, ungainly, ghastly, gaunt, and ominous bird of yore
Meant in croaking `Debts No More.’

Thus I sat engaged in guessing, but no syllable expressing
To the fowl whose fiery eyes now burned into my bankrupt core;
This and more I sat divining, with my head at ease reclining
On the cushion’s velvet lining that the lamp-light gloated o’er,
But whose velvet violet lining with the lamp-light gloating o’er,
He shall press, ah, Debts N
o More!

Then, methought, the air grew denser, perfumed from an unseen censer
Swung by the House of Greenspans’s sacred liens whose foot-falls tinkled on the subprime floor.
`Wretch,’ I cried, `thy God hath lent thee – by these angels he has sent thee
Respite – respite and nepenthe from thy proposition of Debts No More!
Quaff, oh quaff this kind nepenthe, and forget this silliness of Debts No More!’
Quoth the raven, `Debts No More.’

`Prophet!’ said I, `thing of evil! – prophet still, if bird or devil! –
Whether tempter sent, or whether tempest tossed thee here ashore,
Desolate yet all undaunted, on this debt spoiled land all fraudclosure haunted –
On this subprime home by horror haunted – tell me truly, I implore –
Is there – is there a cancer in the Bernanks brain? – tell me – tell me, I implore!’
Quoth the raven, `Debts No More.’

`Prophet!’ said I, `thing of evil! – prophet still, if bird or devil!
By that Heaven that bends above us – by that God we both adore –
Tell this lost soul with unpaid debts laden if, within the distant Eden,
It shall clasp a sainted maiden whom the angels named Debts No More –
Clasp a rare and radiant maiden, whom the angels named Debts No More?’
Quoth the raven, `Debts No More.’

`Be that word our sign of parting, bird or fiend!’ I shrieked upstarting –
`Get thee back into the tempest and the usurious shore!
Leave fraudclosure doom as a token of the words thy soul hath spoken!
Leave my credit score unbroken! – quit the bust above my door!
Take thy beak from out my wallet, and take thy form from off my door!’
Quoth the raven, `Debts No More.’

And the raven, never flitting, still is sitting, still is sitting
On the pallid bust of Subprime Croesus just above my chamber door;
And his eyes have all the seeming of a demon’s that is screaming,
And the lamp-light o’er him streaming throws his shadow on the floor;
And my net worth from out that debtless shadow that lies floating on the floor
Shall be lifted, nevermore!

 

.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/dGSTjhJKA5g/story01.htm williambanzai7

If one watches (or reads) any of the mainstream media, it might seem ‘obvious’ that Europe is doing well; it’s recovering; and the crisis is over (almost over..). However, as Punk Economic‘s David McWilliams explains in this excellent overview of the European delusion and Merkel’s dilemma, there is a “wedge” of unreality between the so-called “markets” and the reality of economic progress. From playing with Germany’s money to moar bailouts, and from Merkel’s enabling of Draghi’s excess to the reality that nothing has changed across the European region, in under 9 minutes, McWilliams brief tour-de-force is a must-watch before you ‘chase’ more performance with the herd. McWilliams concludes, however, with a darker edge of the inevitable endgame of a “slow trudge” to federalization (and loss of sovereignty) that will likely see Nigel Farage (and many others) apoplectic.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/b6_NEZJJb3s/story01.htm Tyler Durden

If one watches (or reads) any of the mainstream media, it might seem ‘obvious’ that Europe is doing well; it’s recovering; and the crisis is over (almost over..). However, as Punk Economic‘s David McWilliams explains in this excellent overview of the European delusion and Merkel’s dilemma, there is a “wedge” of unreality between the so-called “markets” and the reality of economic progress. From playing with Germany’s money to moar bailouts, and from Merkel’s enabling of Draghi’s excess to the reality that nothing has changed across the European region, in under 9 minutes, McWilliams brief tour-de-force is a must-watch before you ‘chase’ more performance with the herd. McWilliams concludes, however, with a darker edge of the inevitable endgame of a “slow trudge” to federalization (and loss of sovereignty) that will likely see Nigel Farage (and many others) apoplectic.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/b6_NEZJJb3s/story01.htm Tyler Durden

Submitted by Michael Snyder of The Economic Collapse blog,

It is hard to find the words to adequately describe how much of a disaster Obamacare is turning out to be.  The debut of Healthcare.gov has been probably the worst launch of a major website in history, millions of Americans are having their current health insurance policies canceled, millions of others are seeing the size of their health insurance premiums absolutely explode, and this new law is going to result in massive numbers of jobs being lost.  It is almost as if Obamacare was specifically designed to wreck the U.S. economy.  Not that what we had before Obamacare was great.  In fact, I have long argued that the U.S. health care system is a complete and total train wreck.  But now Obamacare is making everything that was bad about our system much, much worse. 

Americans are going to pay far more for health care, the quality of that care is going to go down, they are going to have to deal with far more medical red tape, and thousands upon thousands of U.S. employers are considering getting rid of the health plans that they offer to employees altogether due to Obamacare.  If the U.S. health care system was a separate nation, it would be the 6th largest economy on the entire planet, and now Obamacare is going to absolutely cripple it.  To say that Obamacare is an "economic catastrophe" would be a massive understatement.

Of course we were assured that it wouldn't turn out this way.  We were promised over and over that we were going to pay less for health care, get better coverage, and be able to keep our current health plans if we were pleased with them.  The following is what Obama said at a rally in 2009…

"First of all, if you’ve got health insurance, you like your doctors, you like your plan, you can keep your doctor, you can keep your plan. Nobody is talking about taking that away from you."

Oh really?

That was such a dramatic lie that even NBC News is turning on him.  They discovered that Obama has known for three years that most people that rely on individual health insurance policies would not be able to keep them…

Buried in Obamacare regulations from July 2010 is an estimate that because of normal turnover in the individual insurance market, “40 to 67 percent” of customers will not be able to keep their policy. And because many policies will have been changed since the key date, “the percentage of individual market policies losing grandfather status in a given year exceeds the 40 to 67 percent range.”

 

That means the administration knew that more than 40 to 67 percent of those in the individual market would not be able to keep their plans, even if they liked them.

Pretty much everything that Obama told us when he was selling us on his plan has turned out to be a lie.

So what can we expect from Obamacare moving forward?  The following are 10 signs that Obamacare is going to wreck the U.S. economy…

#1 It is being projected that millions upon millions of Americans are going to lose their current health insurance plans thanks to Obamacare.  Most will be faced with the choice of either purchasing much more expensive health insurance or going uninsured.  This will put even more stress on a middle class that is already disintegrating rapidly.  The following is from the recent NBC News investigation mentioned above…

Four sources deeply involved in the Affordable Care Act tell NBC News that 50 to 75 percent of the 14 million consumers who buy their insurance individually can expect to receive a “cancellation” letter or the equivalent over the next year because their existing policies don’t meet the standards mandated by the new health care law. One expert predicts that number could reach as high as 80 percent. And all say that many of those forced to buy pricier new policies will experience “sticker shock.”

#2 The health insurance premium increases that some families are experiencing are absolutely mind boggling.  According to Mike Adams of Natural News, one family in Texas just got hit with a 539% rate increase…

Obamacare is named the "Affordable Care Act," after all, and the President promised the rates would be "as low as a phone bill." But I just received a confirmed letter from a friend in Texas showing a 539% rate increase on an existing policy that's been in good standing for years.

 

As the letter reveals (see below), the cost for this couple's policy under Humana is increasing from $212.10 per month to $1,356.60 per month. This is for a couple in good health whose combined income is less than $70K — a middle-class family, in other words.

According to NBC News, an elderly couple in North Carolina was hit with a similar rate increase…

George Schwab, 62, of North Carolina, said he was "perfectly happy" with his plan from Blue Cross Blue Shield, which also insured his wife for a $228 monthly premium. But this past September, he was surprised to receive a letter saying his policy was no longer available. The "comparable" plan the insurance company offered him carried a $1,208 monthly premium and a $5,500 deductible.

Many Americans that were formerly in favor of Obamacare are now against it after they have seen what it is going to do to their budgets.  The following is one example of this from a recent Los Angeles Times article…

Pam Ke
haly, president of Anthem Blue Cross in California, said she received a recent letter from a young woman complaining about a 50% rate hike related to the healthcare law.

 

"She said, 'I was all for Obamacare until I found out I was paying for it,'" Kehaly said.

#3 Obamacare actually includes incentives for people to work less and make less money.  The following is one example from a recent article by Sean Davis…

In California, a couple earning $64,000 a year would not qualify for health care subsidies. A bronze plan for them through Kaiser would cost them about $1,300 each month, or $15,600 a year. But if that same family earned just $2,000 less, it would qualify for over $14,000 in annual health care subsidies, dropping their premiums for that same Kaiser plan to less than $100 per month.

#4 Thankfully the employer mandate in Obamacare was delayed for a little while, but it will ultimately result in widespread job losses all over the country.  In fact, we are already starting to see this happen.  The following is from a recent article in the Economist…

BEFORE the recession, Richard Clark’s cleaning company in Florida had 200 employees, about half of them working full time. These days it has about 150, with 80% part-time. The downturn explains some of this. But Mr Clark also blames Barack Obama’s health reform. When it comes into effect in January 2015, Obamacare will require firms with 50 or more full-time employees to offer them affordable health insurance or pay a fine of $2,000-3,000 per worker. That is a daunting prospect for firms that do not already offer coverage. But for many, there is a way round the law.

 

Mr Clark says he is “very careful with the threshold”. To keep his full-time workforce below the magic number of 50, he is relying more on part-timers. He is not alone. More than one in ten firms surveyed by Mercer, a consultancy—and one in five retail and hospitality companies—say they will cut workers’ hours because of Obamacare. A hundred part-timers can flip as many burgers as 50 full-timers, and the former will soon be much cheaper.

You can find a very long list of some of the employers that have either eliminated jobs or cut hours because of Obamacare right here.

#5 Even if you are able to keep your job, there is no guarantee that your employer will continue to offer health insurance as an employee benefit.  In fact, it is being reported that large numbers of employers have already decided to no longer offer health insurance to their employees because of Obamacare.

#6 According to CBS News, so far the number of people that have had their health insurance policies canceled is more than three times greater than the number of people that have signed up for new policies under Obamacare…

CBS News has learned more than two million Americans have been told they cannot renew their current insurance policies — more than triple the number of people said to be buying insurance under the new Affordable Care Act, commonly known as Obamacare.

#7 If what is going on in New York is any indication, those that are signing up for health insurance under Obamacare are going to have a really, really hard time finding a doctor…

New York doctors are treating ObamaCare like the plague, a new survey reveals.

 

A poll conducted by the New York State Medical Society finds that 44 percent of MDs said they are not participating in the nation’s new health-care plan.

Another 33 percent say they’re still not sure whether to become ObamaCare providers.

 

Only 23 percent of the 409 physicians queried said they’re taking patients who signed up through health exchanges.

#8 Obamacare is turning out to be a gold mine for hackers and identity thieves.  The personal information of millions of Americans could potentially end up being compromised.  According to CNN, Healthcare.gov was found to be teeming with security holes…

The Obamacare website has more than annoying bugs. A cybersecurity expert found a way to hack into users' accounts.

 

Until the Department of Health fixed the security hole last week, anyone could easily reset your Healthcare.gov password without your knowledge and potentially hijack your account.

And according to the New York Post, Healthcare.gov has been designed so badly from a security standpoint that it might have to be "rebuilt from scratch"…

The chairman of the House Intelligence Committee said ObamaCare’s website, already a tangled mess, might need to be rebuilt from scratch to to protect against cyber-thieves because he fears it’s not a safe place right now for health-care consumers to deposit their personal information.

 

“I know that they’ve called in another private entity to try to help with the security of it. The problem is, they may have to redesign the entire system,” Rep. Mike Rogers said on Sunday on CNN’s “State of the Union” political talk show. “The way the system is designed, it is not secure.”

#9 As I noted in a previous article, approximately 60 percent of all personal bankruptcies in the United States are related to medical bills.  Because millions of Americans are now losing their health insurance policies and millions of others will choose to pay the fine rather than sign up for Obamacare, more Americans than ever will find themselves overwhelmed with medical bills when they get seriously sick.  This will result in even more personal bankruptcies.

#10 In the end, the burden for paying for the subsidies that Obamacare offers is going to overwhelmingly fall on the taxpayers.  This is going to cause our nightmarish national debt to get even worse.  Peter Schiff recently explained why this is going to happen…

It is also ironic that high-deductible, catastrophic plans are precisely what young people should be buying in the first place. They are inexpensive because they provide coverage for unlikely, but expensive, events. Routine care is best paid for out-of-pocket by value conscious consumers. But Obamacare outlaws these plans, in favor of what amounts to prepaid medical treatment that shifts the cost of services to taxpayers. In such a system, patients have no incentive to contain costs. Since the biggest factor driving health care costs higher in the first place has been the over use of insurance that results from government-provided tax incentives, and the lack of cost accountability that results from a third-party payer system, Obamacare will bend the cost curve even higher. The fact that Obamacare does nothing to rein in costs while providing an open-ended insurance subsidy may be good news for hospitals and insurance companies, but it's bad news for taxpayers, on whom this increased burden will ultimately fall.

So what do you think of Obamacare?

Has it directly affected your life yet?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wcaIyqWmDOw/story01.htm Tyler Durden

The Bank of Japan's governor Kuroda proudly told the world "long-term yields are bound to rise at some point, but we can curb it when it happens," and on a grand scale – that is what they have done (for now). But market participants are growing increasingly concerned. As we have warned numerous times, the suppression of 'normal' volatility in teh short-term can only lead to larger uncontrollable moves in the future. As The FT reports, some worry, too, that the BoJ has pushed up JGB prices to the point where interest rates no longer bear any relation to the government’s creditworthiness – "effectively we have removed the light from the lighthouse." Some say the transition has been unsettling as many analysts talk more openly of the risks inherent in what the BoJ is trying to pull off. For one thing, liquidity has evaporated… "volatility looks low now, but if some investors start selling, the impact on the market could be much bigger than expected. That is a big risk."

 

As if to support this view that the Japanese are hiding reality, the US Treasury had some thoughts:

• *U.S. SAYS IT WILL CLOSELY MONITOR JAPAN FOR DOMESTIC DEMAND

 

Realized vol has collapsed in JGB rates (but forward implied volas for Japan swaptions is surging again)…

 

Via The FT,

There are few bigger bond bulls than Haruhiko Kuroda.

 

The governor of the Bank of Japan told a New York forum this month that flat or falling yields in Japan’s Y936tn ($10tn) government bond market “can, and should continue” – even as inflation keeps edging towards the central bank’s target of 2 per cent.

 

…

 

since the end of June, yields have settled into a gentle downward groove, meaning that JGBs have beaten all other markets bar some peripheral Europeans. Bond yields move inversely to prices.

 

Indeed, on Wednesday the benchmark 10-year yield dropped below 0.6 per cent, to its lowest since early May, stretching away from Switzerland as the lowest in the world, as investors anticipated another firm commitment to easing at the BoJ’s policy meeting on Thursday.

 

This is what the governor ordered.

 

…

 

But some say the transition has been unsettling. Analysts are beginning to talk more openly of the risks inherent in what Mr Kuroda is trying to pull off.

 

For one thing, liquidity has evaporated. Banks that used to be busy making markets for private-sector institutions say they have been marginalised

 

…

 

“If a client asks us to bid it’s easy, as the market is very, very stable,” says one dealer who asked not to be named. “But if a client comes with an offer, it is a problem, as the duration to cover a short position is much longer and no one is offering. The BoJ is swallowing everything.”

 

…

 

In the first week of October, for example, the yield on the benchmark 10-year bond moved by just 0.001 per cent, or one-tenth of one basis point, on three consecutive days.

 

…

 

“Volatility looks low now, but if some investors start selling, the impact on the market could be much bigger than expected. That is a big risk.”

 

Some worry, too, that the BoJ has pushed up JGB prices to the point where interest rates no longer bear any relation to the government’s creditworthiness.

 

…

 

Under its previous governor, Masaaki Shirakawa, the BoJ was always sensitive to the charge that it was indulging a profligate government. Under Mr Kuroda, the bank still argues that because the purchases are not made directly from the finance ministry, they do not fall foul of a 1947 law that banned central bank underwriting.

 

But it is an increasingly fine distinction, say analysts.

 

…

 

“Effectively we have removed the light from the lighthouse.”

 

…

 

But the bond market seems to be storing up tensions anyway, says Yasunari Ueno, chief market economist at Mizuho Securities.

 

Investors “should remember”, he says, “that the currently irrational movement will probably translate into a growing momentum for a large price move in the future”.

Or as Taleb wrote: "There is no freedom without noise – and no stability without volatility."

And always a great read on the real dangers of suppressing natural volatility:

ForeignAffairs

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MM5yOV1lBls/story01.htm Tyler Durden

The Bank of Japan's governor Kuroda proudly told the world "long-term yields are bound to rise at some point, but we can curb it when it happens," and on a grand scale – that is what they have done (for now). But market participants are growing increasingly concerned. As we have warned numerous times, the suppression of 'normal' volatility in teh short-term can only lead to larger uncontrollable moves in the future. As The FT reports, some worry, too, that the BoJ has pushed up JGB prices to the point where interest rates no longer bear any relation to the government’s creditworthiness – "effectively we have removed the light from the lighthouse." Some say the transition has been unsettling as many analysts talk more openly of the risks inherent in what the BoJ is trying to pull off. For one thing, liquidity has evaporated… "volatility looks low now, but if some investors start selling, the impact on the market could be much bigger than expected. That is a big risk."

 

As if to support this view that the Japanese are hiding reality, the US Treasury had some thoughts:

• *U.S. SAYS IT WILL CLOSELY MONITOR JAPAN FOR DOMESTIC DEMAND

 

Realized vol has collapsed in JGB rates (but forward implied volas for Japan swaptions is surging again)…

 

Via The FT,

There are few bigger bond bulls than Haruhiko Kuroda.

 

The governor of the Bank of Japan told a New York forum this month that flat or falling yields in Japan’s Y936tn ($10tn) government bond market “can, and should continue” – even as inflation keeps edging towards the central bank’s target of 2 per cent.

 

…

 

since the end of June, yields have settled into a gentle downward groove, meaning that JGBs have beaten all other markets bar some peripheral Europeans. Bond yields move inversely to prices.

 

Indeed, on Wednesday the benchmark 10-year yield dropped below 0.6 per cent, to its lowest since early May, stretching away from Switzerland as the lowest in the world, as investors anticipated another firm commitment to easing at the BoJ’s policy meeting on Thursday.

 

This is what the governor ordered.

 

…

 

But some say the transition has been unsettling. Analysts are beginning to talk more openly of the risks inherent in what Mr Kuroda is trying to pull off.

 

For one thing, liquidity has evaporated. Banks that used to be busy making markets for private-sector institutions say they have been marginalised

 

…

 

“If a client asks us to bid it’s easy, as the market is very, very stable,” says one dealer who asked not to be named. “But if a client comes with an offer, it is a problem, as the duration to cover a short position is much longer and no one is offering. The BoJ is swallowing everything.”

 

…

 

In the first week of October, for example, the yield on the benchmark 10-year bond moved by just 0.001 per cent, or one-tenth of one basis point, on three consecutive days.

 

…

 

“Volatility looks low now, but if some investors start selling, the impact on the market could be much bigger than expected. That is a big risk.”

 

Some worry, too, that the BoJ has pushed up JGB prices to the point where interest rates no longer bear any relation to the government’s creditworthiness.

 

…

 

Under its previous governor, Masaaki Shirakawa, the BoJ was always sensitive to the charge that it was indulging a profligate government. Under Mr Kuroda, the bank still argues that because the purchases are not made directly from the finance ministry, they do not fall foul of a 1947 law that banned central bank underwriting.

 

But it is an increasingly fine distinction, say analysts.

 

…

 

“Effectively we have removed the light from the lighthouse.”

 

…

 

But the bond market seems to be storing up tensions anyway, says Yasunari Ueno, chief market economist at Mizuho Securities.

 

Investors “should remember”, he says, “that the currently irrational movement will probably translate into a growing momentum for a large price move in the future”.

Or as Taleb wrote: "There is no freedom without noise – and no stability without volatility."

And always a great read on the real dangers of suppressing natural volatility:

ForeignAffairs

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MM5yOV1lBls/story01.htm Tyler Durden

Submitted by Marin Katusa via Casey Research,

While the White House spied on Frau Merkel and Obamacare developed into a slow-moving train wreck, while Syria was saved from all-out war by the Russian bell and the Republicrats fought bitterly about the debt ceiling… something monumental happened that went unnoticed by most of the globe.

The US quietly surpassed Saudi Arabia as the biggest oil producer in the world.

You read that correctly: "The jump in output from shale plays has led to the second biggest oil boom in history," stated Reuters on October 15. "U.S. output, which includes natural gas liquids and biofuels, has swelled 3.2 million barrels per day (bpd) since 2009, the fastest expansion in production over a four-year period since a surge in Saudi Arabia's output from 1970-1974."

After the initial moment of awe, pragmatic readers will surely wonder: Then why isn't gasoline dirt-cheap in the US?

There's indeed a good explanation why most Americans don't drive up to the gas pump whistling a happy tune (and it has nothing to do with evil speculators). Let's start with the demand side of this equation.

Crude oil consists of very long chains of carbon atoms. The refineries take the crude and essentially "crack" those long chains of carbon atoms into shorter chains of carbon atoms to make various petroleum products. Some of the products that are made from petroleum may surprise you.

The United States has the largest refining capacity in the world and is still by far the largest consumer of oil in the world (though China is beginning to catch up), and its refineries require 15 million barrels of oil a day. That means even though, due to the shale revolution, domestic production has dramatically increased to about 8 million barrels, the US still has to import between 7 and 8 million barrels of expensive foreign oil a day.

Let's take a look at who the US buys the imported oil from. (Now that I finally figured out my way around the new Windows 8—which, by the way, really sucks—I can even add some color to my tables.)

Canada is blue because it is not only friendly with the US, but also has the ability to increase oil production. The other countries are red because they either have decreasing oil production, or the country is not on good terms with the US government, or the production may be at risk for various reasons. The "red countries" all sell oil to the US at higher prices than does Canada.

As I said, the US imports about 7 million barrels of oil a day, and our top 5 exporters make up between 5.6 and 6.8 million barrels while the rest is split among other countries.

This means that even though the US has significantly increased its oil production in the past five years, a good chunk of oil has to be imported at much higher prices. And higher crude oil prices for refineries means higher prices at the gas pump.

But that's not the only issue: The "new oil" produced from the shale oil fields in the Bakken and Eagle Ford formations isn't cheap. Both the Bakken and Eagle Ford have been hugely successful, and an average well in either region can produce over 400 barrels of oil per day.

That may sound like a lot, but drilling thousands of meters into the ground (both vertically and horizontally), then casing and fracking the well, costs millions of dollars. And the trouble doesn't end once the well has been drilled: oil and gas production can drop as much as 50% in the first year.

Think of it as running on a treadmill—but the incline gets steeper and steeper the longer you run. That's the current reality of America's oil production.

Now, these areas also have to deal with declining legacy oil production ("legacy" meaning older oil wells that produced before fracking became popular) due to depletion rates. Freeze-offs, and even hurricane season can affect the legacy oil wells' production decline.

As the old wells begin to deplete, they need to be replaced by unconventional wells with horizontal drilling and hydraulic fracturing. Even though these new wells provide an initial burst of production, they decline very quickly. That means you need to drill even more wells just to keep up—and the vicious cycle continues.

The costs, as you can imagine, are forbiddingly high. Even in known oil-rich regions like the Bakken and Eagle Ford, the all-in cost of extracting a barrel of oil from the ground can cost as much as US$75 per barrel (for comparison, Saudi Arabia can produce oil for as low as US$1 per barrel). To put it in simple terms: cheap oil in North America is a thing of the past.

So, the US produces expensive oil and relies on imports of even more expensive oil. And since the refiners need to make money as well, this means higher prices at the pumps. Who loses? The US consumer, of course.

What would help lower gas prices? Building more pipelines to deliver cheaper Canadian oil to refineries in the US and decreasing the refineries' dependence on expensive foreign oil. Until these new and much safer pipelines are built, rail has to pick up the slack. Almost 400,000 railcars full of oil are expected to be shipped in 2013, compared with just 9,500 railcars in 2008, a whopping 41-fold increase.

But rail is not the answer. In fact, transporting oil by rail is much more dangerous than transporting it by pipeline. Just last week, we wrote about two recent accidents, one of which claimed 47 lives.

Federal and state taxes at every step of the gasoline-making progress make the pain at the pump even worse. The US government already takes more than 60% of the divisible income from every barrel of oil produced… and another 50 cents per gallon at the pump.

Then there's the matter of Obama's supposed "Green Revolution" and how America would be saved through the use of alternative energies. Obama wrote massive checks to different renewable energy firms that went belly-up, the most famous
of them all being solar panel manufacturer Solyndra, whose bankruptcy cost American taxpayers more than $500 million. Obama is also a heavy supporter of ethanol (his home state of Illinois, after all, is the third-largest ethanol-producing state) and has increased the targets for the use of ethanol in transportation.

Someone has to pay for all of these subsidies, so why not get the dirty, evil oil companies to pay for them? Keep in mind, though, that the oil companies have enough lobbyists and lawyers to keep the government at bay—so the higher prices will be passed on to the consumers.

To sum up why the price of gasoline is so high even though the US is producing so much more oil than before:

1. The high cost of American oil production
2. Even higher costs due to imported (non-Canadian) oil
3. Obama not allowing cheaper Canadian oil to flow to the refineries via pipelines such as the Keystone XL
4. The taxes on crude are used to fund Obama's green dream—his green-energy "legacy"—and his love for ethanol and the taxes at the pump will not decrease

 

Doug Casey and I are convinced that new technologies applied in the Old World will bring huge New World profits. But don't take my word for it—I challenge you to try out my research. Click here to take me up on my 100% money-back guarantee.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LwFMArC-e_A/story01.htm Tyler Durden

The chair of the House Intelligence Committee – Mike Rogers – said yesterday in an NSA spying hearing which he led that there is no right to privacy in America.

Constitutional expert Stephen I. Vladeck – Professor of Law and the Associate Dean for Scholarship at American University Washington College of Law – disagreed.

Here’s the exchange:

Rogers: I would argue the fact that we haven’t had any complaints come forward with any specificity arguing that their privacy has been violated, clearly indicates, in ten years, clearly indicates that something must be doing right. Somebody must be doing something exactly right.

 

Vladeck: But who would be complaining?

 

Rogers: Somebody who’s privacy was violated. You can’t have your privacy violated if you don’t know your privacy is violated.

 

Vladeck: I disagree with that. If a tree falls in the forest, it makes a noise whether you’re there to see it or not.

 

Rogers: Well that’s a new interesting standard in the law. We’re going to have this conversation… but we’re going to have wine, because that’s going to get a lot more interesting…

What Rogers is really saying is that the government has the right to spy on everyone so long as it doesn’t get caught doing so.

How’s that different from arguing that it’s okay for a thief to takes $100 from your bank account as long as you don’t notice that the money is missing? Or that it’s okay to rape a woman while she’s passed out so long as she doesn’t realize what happened?

That’s beyond ridiculous.

It flies in the face of more than 200 years of American law. In fact, experts say that the NSA spying program is wildly illegal, and is exactly the kind of thing which King George imposed on the American colonists … which led to the Revolutionary War.

Hat tip: Tech Dirt.

 

BONUS: 

How to Help Protect Yourself from Fukushima Radiation

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/u79J-ddmN_s/story01.htm George Washington

Today’s AM fix was USD 1,349.50, EUR 980.81 and GBP 840.23per ounce.
Yesterday’s AM fix was USD 1,346.75, EUR 978.81 and GBP 837.06 per ounce.

Gold dropped $8.40 or 0.62% yesterday, closing at $1,344.60/oz.
Silver rose $0.01 or 0.04% closing at $22.48. Platinum fell $15.50 or
1.1% to $ 1,454.50/oz, while palladium slipped $0.78 or 0.1% to
$742.72/oz.

Gold was treading water below five week highs today, as investors
weighed the decline in Chinese demand from record levels with still very
robust demand in India. Silver is up 1% as robust industrial and store
of wealth demand supports silver.

Silver in US Dollars, 1 Year – (Bloomberg)

Gold prices in China closed lower than global prices yesterday for
the first time this year. This may be due to a slight decrease in demand
in recent days. There was also speculation that this was due to fears
of a credit tightening and the possibility of a credit crisis in China.

Indian premiums stayed near record highs at $130 per ounce due to a supply crunch and supply shortages.

Hedge funds and money managers raised bullish bets in futures and
options of U.S. gold and silver markets for the week ended October 8,
the latest report by the Commodity Futures Trading Commission (CFTC)
showed.

More savvy trend following speculators are getting long gold again in anticipation of higher prices.

The Fed will make a statement later on Wednesday at the end of its
two-day policy meeting. The bank is widely expected to say it will stay
on course with its ultra loose monetary policies and will not reduce its
money printing, debt monetisation programme.

U.S. stocks closed at historic highs on hopes that the Fed will
continue supporting and indeed creating another liquidity driven bubble.

U.S. Mint sales advanced across all bullion products in October. In
total ounces, U.S. Mint distributors bought 5,000 ounces of gold coins
and 197,500 ounces of silver coins.

Silver Eagle bullion coins advanced 194,500 for a year-to-date total
of 39,175,000. This means they are on track for  a new annual record –
surpassing the record seen in 2011.

When the annual record for the Silver Eagles happened in 2011 at
39,868,500, it took until December 13, for sales to reach the levels
reached this year.

================================================================
                                       Total
                                     Ounces        YOY%        MOM%
================================================================
Oct. 2013
Month-to-Date        3,087,000
Full month pace     3,381,000        7.2%       12.2%
—————————————————————-
Sept. 2013               3,013,000       -6.6%      -16.9%
Aug. 2013                3,625,000       26.3%      -17.7%
July 2013                 4,406,500       93.4%       34.5%
—————————————————————-
June 2013               3,275,000       14.6%       -5.3%
May 2013                 3,458,500       20.3%      -15.4%
================================================================
American Eagle Bullion Sales In One Ounce Coins – Bloomberg via U.S Mint

The U.S. Mint’s sales of American Eagle silver coins have
reached 3.087 million troy ounces so far this October and have
surpassed the September sales figure, according to figures from the U.S.
Mint’s website. Sales increased to 3.087 million troy ounces in October
from 3.013 million troy ounces in September.

Monthly American Eagle Bullion Sales In One Ounce Coins – U.S. Treasury via Bloomberg

The figures are as of yesterday and at that pace, total sales for the
month would be 3,381,000 ounces, up 7.2% from a year earlier.

The chart above clearly shows the long term trend towards higher
silver eagle demand in recent years as store of value buyers accumulate
silver eagles to protect against currency devaluation and wealth
confiscation.

Below are the latest daily, October and year-to-date United States Mint bullion sales figures, courtesy of CoinNews.net

CoinNews.net

Some of those who bought silver in 2011 as an investment may be
reluctant to buy more silver due to recent volatility. We have long
pointed out that silver is not an ‘investment’ per se rather it is a
store of value and a form of financial insurance. Silver is to be bought
for the long term – until it has to be sold due to a need to raise cash
– indeed a permanent holding.

Realising this helps people stomach the short term price swings that
are typical in the silver market. This is important as silver will
protect them from currency devaluations and the coming bail-in regime.

It is worth pointing out that all markets are volatile today and silver’s volatility is often exaggerated.

 
Silver in US Dollars, 5 Years – (Bloomberg)

Silver remains undervalued from a long term, historical, inflation adjusted perspective.

Our long held belief that silver could reach the record 1980 high in real terms, inflation adjusted, if $140/oz remains.

Immediate support is at the $18/oz to $20/oz level (see charts) and
store of value buyers should continue to accumulate on this dip.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-fX309ZZvig/story01.htm GoldCore