Walmart Misses Revenues, Guides Below Consensus, Blames Fewer Government Handouts, Healthcare Costs, FX

In what has become a quarterly tradition, Wal-Mart once again swung and missed, largely as expected – after all it snowed in the quarter. Just kidding. While the WMT bottom line was more or less in line, with Adjusted EPS of $1.60 beating expectations of $1.59, the world’s largest retailer missed on the top line posting $129.71 billion in Q4 revenue compared to $130.24 billion expected. What also disappointed was the decline in free cash flow which dropped from $12.7 billion in 2012 to $10.1 billion in 2013. What is worse is that the company reported sliding Q4 comp store sales, which declined -0.4% with and without fuel, compared to an expectation of a +0.2% increase, and well below the 0.5% increase a year ago. But the biggest hit was in the company guidance which now expects Q1 and Full Year EPS of $1.10-1.20 and $5.45-$5.55; both below the sellside consensus of $1.24 and $5.55. Alas for Walmart, it is impossible to blame the weather for weaker upcoming results, and so the company didn’t even try. Instead what the company did blame for the current and future weakness is, naturally, the economy, the weak consumer, who is now receiving less government handouts, as well as tighter credit and notably, higher healthcare costs. These combined made Walmart admit that it will be “difficult to achieve the goal we have of growing operating income at the same or faster rate than sales.”

“We expect economic factors to continue to weigh on our outlook,” said Holley. “Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit. Further, we have higher group health care costs in the U.S. These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales. In October, we forecasted a 3 to 5 percent net sales increase for fiscal 2015. Given these factors and the ongoing headwind from currency exchange, we expect to be toward the low end of the net sales guidance.

 

“Additionally, all guidance provided today assumes currency exchange rates remain at current levels,” added Holley. “If currency rates remain where they are today, net sales would be negatively impacted by approximately $3.5 billion for fiscal 2015. During the first quarter of this year, we will begin to anniversary the increased costs we incurred last year for FCPA matters, including compliance program enhancements and the ongoing investigations. We anticipate expenses for FCPA matters and compliance-related enhancements to range between $200 and $240 million for fiscal 2015.”

The only good news: unlike everyone else, WMT actually does plan to boost its capex which is precisely what the US economy needs in order to actually grow in reality instead of just on manipulated paper.

The company announced plans to expand its original Walmart U.S. capital plan for this fiscal year by accelerating U.S. small store growth through Neighborhood Market and Walmart Express units.

 

“In October, we announced our plan to grow our U.S. store base with large and small formats,” said Bill Simon, Walmart U.S. president and CEO. “Today, we are expanding on our original plans with additional small stores. We will maintain our projection for supercenter growth with approximately 115 new stores.

 

“Neighborhood Markets continued to deliver consistent solid comp sales growth, and customers appreciate the convenience of our small stores. They are a proven model,” added Simon. “Were also pleased with how well the 20 Express stores are doing, and were expanding our pilot beyond the initial three markets. These small formats are digitally connected and provide customers convenient access to a broad assortment, including fresh, pharmacy and fuel. We will now open between 270 and 300 small format units this year, which will nearly double our fleet and fuel growth as we enter the next generation of retail.”

 

The result of this program enhancement is an increase of $600 million to the companys total fiscal year 2015 forecast for capital expenditures. The updated range is $12.4 to $13.4 billion versus the October forecast of $11.8 to $12.8 billion.

 

The following tables provide an update to the companys previously provided plans for capital expenditures, net retail square footage growth and total U.S. unit growth for fiscal year 2015.

In summary: anyone hoping that WMT will boost their minimum wage is advised not to hold their breath.


    



via Zero Hedge http://ift.tt/1d3Zy7M Tyler Durden

USDJPY 102 Tractor Beam Overrides All Overnight Economic Disappointment

After learning that it snowed in China this winter following the release of the abysmal February Flash HSBC PMI numbers, we found out that there had also been snow in Europe, following misses across virtually all key French, German and composite PMIs with the exception of the German Services PMI which was the sole “beater” out of 6. To wit:

  • Eurozone PMI Manufacturing (Feb A) M/M 53.0 vs Exp. 54.0 (Prev. 54.0); Eurozone PMI Services (Feb A) M/M 51.7 vs Exp. 51.9 (Prev. 51.6)
  • German Manufacturing PMI (Feb A) M/M 54.7 vs. Exp. 56.3 (Prev. 56.5); German PMI Services (Feb A) M/M 55.4 vs Exp. 53.4 (Prev. 53.1)
  • French PMI Manufacturing (Feb P) M/M 48.5 vs. Exp. 49.6 (Prev. 49.3); French PMI Services (Feb P) M/M 46.9 vs. Exp. 49.4 (Prev. 48.9)

Of course, economic data is the last thing that matters in a manipulated market. Instead, all that does matter is what the USDJPY does overnight, and as we forecast yesterday, the USDJPY 102 tractor beam is alive and well and managed to pull equity futures from a -10 drop overnight to nearly unchanged, despite the now traditional pattern of USDJPY selling during the overnight session and buying during the US session.

Today we get the latest US CPI and weekly jobs report, as well as the Philly Fed business outlook and DoE data.

Headline Bulletin from RanSquawk and Bloomberg

  • Risk off sentiment dominated the session in reaction to somewhat hawkish FOMC minutes and worse than expected PMI data from China, Germany and France.
  • EUR under broad based selling pressure, with EUR/USD below 1.3700 level, amid a firmer USD and GBP supportive M&A related flow (Vodafone/Verizon).
  • Going forward, market participants will get to digest the release of the latest US CPI and weekly jobs report, as well as the Philly Fed business outlook and DoE data.
  • Treasuries gain, reversing move seen after Fed minutes which showed participants agreed that tapering will continue, some said “it would soon be appropriate” to change forward guidance, given unemployment rate nearing 6.5%.
  • A Chinese manufacturing index fell to the lowest level in seven months, adding to challenges for Communist Party officials grappling with risks to the financial system from trust defaults and soured loans
  • Japan’s trade deficit widened to a record in January as surging import costs weigh on Prime Minister Shinzo Abe’s campaign to drive a sustained recovery
  • Tepco, operator of the crisis-ridden Fukushima Dai-Ichi nuclear power plant, said it found a new leak near the tanks holding contaminated water
  • German manufacturing may expand at a slower pace this month, according to a survey of purchasing managers released today by Markit; an advance reading of the index fell to 54.7 from 56.5 in January
  • The factory gauge for the euro region unexpectedly slipped to 53 from 54 in January, while the services measure rose less than estimated to 51.7 from 51.6, Markit said today
  • At least seven people died in a new wave of deadly clashes in the Ukrainian capital as a truce declared last night by President Viktor Yanukovych and opposition leaders fell apar
  • Markets from Hungary to Poland and Russia are suffering contagion from the violence rocking Ukraine’s capital, sending bond yields higher and currencies lower as the turbulence afflicting developing nations deepens
  • Venezuelan protests turned violent again as President Nicolas Maduro addressed the nation and opposition chief Leopoldo Lopez awaited arraignment at military prison for his  role in protest that began last week
  • Matteo Renzi, Italy’s prime minister-designate, won over the leaders of a divided parliament by coaxing some rivals into cooperation and keeping his cool under a barrage of insults from others
  • Sovereign yields mostly higher. EU peripheral spreads wider. Asian stocks fall, led by Nikkei -2.15%. European stocks, U.S. stock-index futures decline. WTI crude and copper lower, gold higher

Market summary

Heading into the North American open stocks in Europe are seen lower across the board, albeit off the worst levels of the session, as the release of weaker than expected French, German and Chinese PMIs, as well as somewhat hawkish FOMC minutes dampened demand for riskier assets. Nevertheless, the initial bid tone by Bunds was not sustained and the uptick observed in the first few hours of trade was gradually pared amid the absorption of supply from France and Spain. Still, worse than expected macroeconomic data from Eurozone weighed on EUR across the board, which also saw the major pair move below the key 1.3700 level.

US Event Calendar

  • 8:30am: CPI m/m, Jan., est. 0.1% (prior 0.3%); CPI Ex Food and Energy m/m, Jan., est. 0.1% (prior 0.1%);
  • 8:30am: Initial Jobless Claims, Feb. 15, est. 335k (prior 339k); Continuing Claims, Feb. 8, est. 2.970m (prior 2.953m)
  • 8:58am: Markit US PMI Preliminary, Feb., est. 53.6
  • 9:45am: Bloomberg Economic Expectations, Feb. (prior -5); Bloomberg Consumer Comfort, Feb. 16 (prior -30.7)
  • 10:00am: Philadelphia Fed Business Outlook, Feb., est. 8.0 (prior 9.4)
  • 10:00am: Index of Leading Economic Indicators, Jan., est. 0.4% (prior 0.1%)
  • 10:00am: Mortgage Delinquencies, 4Q (prior 6.41%) MBA Mortgage Foreclosures, 4Q (prior 3.08%)
  • 11:00am: POMO – Fed to purchase $2.25b-$2.75b in 2021-2024 sector

Asian Headlines

Chinese HSBC Flash Manufacturing PMI (Feb) M/M 48.3 vs. Exp. 49.5 (Prev. 49.5); 7 month low. (BBG)
– Employment sub index 46.9, lowest since February 2009.

HSBC said the building up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening. (RTRS)

Japanese Trade Balance (JPY)(Jan) M/M -2790.0bln vs. Exp. -2487.0bln (Prev. -1302.1bln, Rev. -1304.2bln) (BBG)
– Exports (Jan) Y/Y 9.5 vs. Exp. 12.7 (Prev. 15.3)
– Imports (Jan) Y/Y 25.0 vs. Exp. 22.7 (Prev. 24.7)

EU & UK Headlines

Eurozone PMI Manufacturing (Feb A) M/M 53.0 vs Exp. 54.0 (Prev. 54.0)
– Eurozone PMI Services (Feb A) M/M 51.7 vs Exp. 51.9 (Prev. 51.6)

German Manufacturing PMI (Feb A) M/M 54.7 vs. Exp. 56.3 (Prev. 56.5)
– German PMI Services (Feb A) M/M 55.4 vs Exp. 53.4 (Prev. 53.1)

French PMI Manufacturing (Feb P) M/M 48.5 vs. Exp. 49.6 (Prev. 49.3)
– French PMI Services (Feb P) M/M 46.9 vs. Exp. 49.4 (Prev. 48.9)

Even though Bund futures have come off the best levels of the session following the absorption of supply from Spain (EUR 5.018bln vs. Exp. EUR 4-5nln) and France (EUR 7.983bln vs. Exp. EUR 7-8bln), peripheral bond yield spreads remained wider, with SP/GE 10s underperforming amid somewhat lacklustre bidding.

According to the UK Chancellor Osborne, Britain’s economic recovery is not secure because it is too dependent on the consumer. Osborne adds that businesses are not investing or exporting enough. (Telegraph) The comments come ahead of the UK Budget next month, where Osborne is now expected to reaffirm his commitment to cut the UK deficit despite recent figures showing better than expected growth.

US Headlines

Fed’s Williams (Non-Voter, Dove) said he would prefer more verbal guidance over 6.5% unemployment threshold. Williams added that the economy is looking “really solid” for this year and “hurdle is pretty high” for changing taper pace this year. Williams added he expects Fed funds rate to stay at zero well into 2015 and that policy needs to
remain highly accommodative. (BBG)

Equities

Reversal by Bunds following the absorption of supply from France and Spain also supported the recovery in European equities this morning, which remain lower after coming under pressure in reaction to the release of weaker PMI from China and somewhat hawkish FOMC minutes. In terms of notable movers, London listed BAE Systems (-8.7%) is among the worst performing stocks after forecasting lower 2014 earnings pre-market.

In terms of US specific commentary, Facebook announced that it is to buy mobile message app WhatsApp for USD 19bln. According to reports, WhatsApp stock is to be cancelled in exchange for USD 12bln Facebook stock and USD 4bln cash.

FX

EUR came under broad based selling pressure following the release of weaker than expected PMI data from France and Germany, with EUR/GBP also weighed on by touted M&A related flow (Vodafone/Verizon). At the same time, despite the risk off sentiment, USD/JPY and EUR/CHF managed to recover off the lowest levels of the session, which indicates that there is scope for the sentiment to reverse. Looking elsewhere, spot RUB, EUR/HUF and EUR/PLN remain bid amid ongoing unrest in Ukraine, which risks causing capital flight in other neighbouring Eastern European states.

Commodities

Iran and the P5+1 group have reached an agreement on an agenda for negotiations over Iran’s nuclear programme and will meet for further discussions next month in Austria, according to Iranian officials. (RTRS)

Should these reports be confirmed by Western powers, it would indicate another step forward in solving the trade disputes with Iran, despite the US previously warning that a final agreement may not be possible.

Analysts at UBS hiked its forecast for average gold and silver prices, citing a shift in investor sentiment for the short term. The banks’ forecast for gold was raised 8.3% to USD 1,300 per oz in 2014, whilst leaving its 2015 forecast unchanged. Silver average price estimates were raised to USD 22.30 per oz, up from USD 20.50.

Morgan Stanley said the cost to fill US gas stores have been overestimated and gas should trend lower, possibly falling under USD 4 in Q3. (BBG)

Analysts at SocGen see moderate downside risk to its 2014 crude forecasts. (BBG)


    



via Zero Hedge http://ift.tt/1jfCs36 Tyler Durden

Asia Imports Huge 80% Of Swiss Gold And Silver Exports In January

Today’s AM fix was USD 1,313.75, EUR 959.22 and GBP 788.90 per ounce.

Yesterday’s AM fix was USD 1,318.75, EUR 959.09 and GBP 791.14 per ounce.  


Gold fell $11.80 or 0.89% yesterday to $1,310.20/oz. Silver dropped $0.52 or 2.37% at $21.44/oz.



Gold and Silver Cross Currency Rates – (Bloomberg)

Gold is marginally higher in London as investors continue to digest the recent weaker U.S. data and continuing ultra loose monetary policies. Gold futures dropped 0.8% yesterday as minutes from the last meeting of the U.S. Federal Reserve suggested that the Fed will not scale back plans to reduce their monthly multi billion dollar bond purchases.


More data overnight confirms that gold is flowing from west to east and from the western banking system into strong store of wealth hands in Asia. This includes Asian investors and store of wealth buyers and indeed Asian central banks including the People’s Bank of China.

Asia accounted for more than 80% of Swiss gold and silver bullion coin and bar exports in January, the Swiss Federal Customs Administration said today in an e-mailed report covered by
Bloomberg.

Interestingly, as suspected most of the bullion exported to Asia from Switzerland came from London.

As holdings in gold-backed funds that are mostly listed in the U.S. and Europe declined, lower prices led to demand from Asia in a further sign of bullion flowing from the west to east. While the majority of the demand is from Asia itself, there is a percentage of the flow that is of western investors seeking to own gold outside the banking system, in what they perceive to be safer jurisdictions in allocated gold accounts in Hong Kong and Singapore.

Hong Kong was the top destination of Swiss bullion exports at 44% on a value basis, with India at 14%, the Bern-based customs agency said in its first breakdown of the gold trade data since 1980.

Singapore accounted for 8.6% of exports, the United Arab Emirates 7.9% and China 6.3%, according to Bloomberg.


Switzerland imported 4.32 billion Swiss francs ($4.87 billion) of gold and silver bullion from the U.K., or 60% of total inbound shipments, according to the report. The U.S. was second at 4.9%, Italy at 3.8%, Germany at 2.8% and Thailand at 2.5%, the data showed.

Webinar: Gerald Celente On Strategies For Protecting Your Wealth In 2014 And Beyond

Join Gerald Celente on this broadcast today as he examines the opportunities in 2014 and in the coming uncertain years.

Gerald Celente needs little introduction: Founder of The Trends Research Institute in 1980, Gerald Celente is a pioneer trend strategist. He is author of the national bestseller Trends 2000 and Trend Tracking (Warner Books) and publisher of the internationally circulated Trends Journal newsletter.

Celente’s Trends Research Institute has been featured on Oprah Winfrey amongst hundreds of media interviews and credited with forecasting many major geopolitical and economic trends.

These include the “Panic of ’08,” the collapse of the Soviet Union, the dot-com bust, the 1997 Asian currency crisis, the 1987 world stock market crash, increased terrorism against America, “Crusades 2000,” and the quagmire in Iraq … before war began and the last two recessions.

 

This webinar is scheduled for today, February 20, 2014, 1:00 PM – 2:00 PM GMT and will be moderated by Mark O’Byrne, Head of Research at GoldCore.


    



via Zero Hedge http://ift.tt/1jfCs30 GoldCore

The Twisted Motives Behind Political Correctness

Submitted by Brandon Smith of Alt-Market.com,

As I have confessed in the past, in my early years I found myself active in the Democratic Party and the general liberal methodology. I had no understanding of the concept of the false left/right paradigm. I had no inkling of the dangers of globalism and central banking. I had no concept of decentralization or non-participation. I had never even heard of libertarianism. I knew only that George W. Bush was a criminal (and I was right), but the problem went far deeper than the GOP. I was astoundingly ignorant of the bigger picture.

However, what I did have going for me was an almost violent sense of nonconformity. I hated collectivists, yet I found myself surrounded by them while working within the leftist culture. It was the insanity of self-proclaimed “liberals” that taught me the true nature of the facade of politics. When I realized that the Democrats were essentially the same corrupt entity as the neoconservatives, everything in my life changed.

One aspect of liberalism with which I am now very familiar is political correctness. I didn’t understand it at the time, not until I stepped outside the cultism of it and looked in from a wiser place. It always bothered me, but I couldn’t quite grasp why until later. Then, it hit me like a revelation. Political correctness was not a political ideology. No, it was a religion, a full-fledged spiritual con, a New Age ghetto of frothing mishmash that is sociological voodoo. And the leftists were eating it up like steak night at an all-you-can-eat buffet.

These people were rationally retarded. Every idea they proposed they merely parroted from books and articles they had read. They were like malfunctioning automatons trapped in a cycle of discontented social criticism. Their desperation to invent meaning in the midst of their irrelevant lives made me feel ill. If they could not find a legitimate cause to champion, they would create one out of thin air and defend it relentlessly, regardless of how shallow it truly was.

When I outline my analysis of economic destabilization within the United States or I write about the rise of the police state, I am driven by a fundamental sense of concrete concern. There are indeed real problems in the world, swirling in a storm of obvious factual conflicts. But the warriors of the PC culture don’t see any of it. Rather, they fantasize about injustices that don’t exist, trespasses that are ultimately fictional. They imagine themselves champions of some greater purpose that, in the end, doesn’t matter.

Recently, I read a news story about a “transgendered teen” in Maine. When the boy was in the fifth grade, he decided to dress as a girl and demanded to use the girl’s bathroom at his public school, despite having the biological apparatus of a male. This story was international news, folks! Why? I can’t say, except that the mainstream media have made a point to focus on “gender optional” issues as if they represent some kind of civil rights uprising.

The issue perfectly illustrates the disturbing nature of politically correct culture.

Teachers at the school did not deny the student the use of restroom facilities. In fact, they allowed him to use the teacher’s bathrooms to avoid any confusion. The Maine Supreme Judicial Court, on the other hand, had other ideas. It ruled that the school’s refusal to allow the boy to use the girl’s facilities constituted a violation of the State’s anti-discrimination law. The ruling has been heralded as a massive victory for the politically correct narrative.

Now, let me make one thing clear: I could not care less about this boy’s sexual orientation (if he even has one). I do think the very idea that a fifth-grader at about the age of 10 is sexually conscious enough to develop a sense of gender dissuasion is absurd. Children who haven’t even experienced puberty yet, proclaiming they are transgendered? Utter nonsense. I find it far more likely that the student’s PC-obsessed parents influenced him to come to such a decision despite his naivety.

That said, a person’s sexual proclivities are not my concern. In fact, I have no interest whatsoever in the infatuations of any individual. That is a personal matter. I do not judge such people on their attractions. I do, though, judge people on how they handle their infatuations. What happens when someone wears his sexuality on his shoulder like a fashion accessory? Why is that even necessary? Is it not rather mentally backward for any person to base his public persona solely on his carnal compulsions? Do I dance around on the sidewalk bellowing to strangers how much I love the curves of women? Do I require a sociopolitical legal apparatus to vindicate my existence? Do I feel the need to shame gay people into publicly embracing my straight man’s libido? No, I do not.

The PC culture demands that we, as individuals, openly accept the sexual orientations of anyone and everyone; otherwise, we are labeled prejudiced monsters. It is not enough that we object in a logical manner. No, we must fall to our knees and thank the stars for the very existence of gender chameleons.

In the end, the psychological gender position of any particular person does not overrule his biological features. A child with a penis is a boy. Period. He will never be a girl. Ever. Not without surgical aid. And even then, he will never have the ability to give birth, which is the very hallmark of femininity. (Sorry, feminists, but that’s how it goes.) A boy, no matter his mental orientation, does not belong in a girl’s lavatory. The privacy rights of the girls outweigh the gender confusion of the boy. If I were a girl (why not play some gender games since everyone else is), I would beat the living hell out of any boy gallivanting in a dress in a bathroom I was using and make sure he never dared come back. And, by extension, if I were a rather mischievous boy with an aptitude as a peeping tom, why not dress up in a tutu in the hopes of getting a glimpse of the forbidden while being legally protected by the State?

The warped conflicts that arise, though, are not the creation of the child in question. A fifth-grader has no concept of gender rights or political correctness. This issue was a creation of the PC cult and its acolytes. These people don’t actually care about the children they involve in their legal dramas. They exploit them, with every intent to abandon them once they have chiseled their agenda into the gray matter of every American.

What truly motivates these people? Why do they do what they do? I think my experience with leftists makes me a well-positioned observer of the psychology of the culture. Here are the hidden thought processes I have witnessed while dealing directly with the PC army.

PC Elitism

One of the unfortunate side effects of religion is that proponents often use it as a means to feel superior to others. I have seen it in Christianity as much as I have seen it in any other belief system. It is the primary reason why I refuse to subscribe to organized and establishment-sanctioned spiritualism. Religion should be a personal experience first and foremost, not an easy way to fit in with the collective. Communing with others who share one’s beliefs should be secondary. Hypocritically, politically correct adherents often criticize Christians for their collectivist elitism while suffering from the same problem themselves.

PC culture allows participants to pretend as though they have some greater understanding of the world, an elevated knowledge of life that makes them superior to the uninitiated. It is important to understand that when a person pursues the methodology of zealotry, he doesn’t do it to make the world a better place; he does it to feel better about his place in the world.

The politically correct are so violent in the assertion of their ideals because they crave the subjugation of the mainstream and a recognition of their “rightness.” They don’t want people to “accept” their beliefs as tolerable. They want people to adore their beliefs as supreme. They want every man, woman and child to reinforce their ideals without question.

The malfunction of this philosophy is that zealots are never finished. They must always find new ways to feel superior to others. So they continuously engineer new taboos and new sins, no matter how ridiculous, so that they can forever look down upon the laymen. Because of this, there will never be an end to PC law. It will go on forever, labeling numerous social interactions and stances as “aberrant” — never satiated and never satisfied.

PC Futurism

The young are always searching for ways to feel wiser than the old. This is just the natural way of things, at least in America. Now, I know from ample experience that age does not necessarily denote intelligence. I’ve met plenty of idiotic people who had decades of time to learn from their mistakes but didn’t. But the young, many of whom lack time and struggle, have a terrible tendency to either pretend that they have “seen it all.” Or they pretend that the very atmosphere of the day somehow gives them a greater insight than generations past. The reality is that most of them know very little of import. This attitude comes from a philosophy called “futurism” (popular with the Nazis and the Soviets), which holds that all the beliefs and discoveries of the past mean nothing compared to the beliefs and discoveries of the present. This ideology is alluring to the young, because it gives them a way to feel intellectually dominant over older and more “ignorant” people who are “behind the times.”

Political correctness is basically an appendage of futurism. By labeling elders as social bigots and products of a barbaric era who don’t understand the “lingo” of the PC elite, liberalism draws in and collectivizes the fledgling left. Younger generations are given a cultural avenue toward high priesthood, a right of passage usually reserved for the aged. They get to skip ahead past all the trials and tribulations of life and announce their deep awareness of the so-called greater good.

The values of forefathers past become archaic scrawlings of racist and prejudiced cavemen who could never appreciate the “brilliance” of today’s academia. The inherent freedoms of natural law that have existed since time began are nothing more than obstacles to them, standing in the way of a new and better world where they have somehow outsmarted human instinct and centuries of history.

PC Collectivism

The very foundation of political correctness is solidified in a desire for the perpetual reinforcement of one’s worldview. PC people need every other person around them to sing the praises of their pure virtues. If I happen to disagree with the idea of gender bending, for instance, as some kind of socially persecuted subculture that needs overt government protection, then I am, of course, labeled a hateful Neanderthal. If I stand in opposition to the concept of victim group status in general, in which the state demands that designated “minorities” be given special treatment regardless of the status of the individual, then I become a racist political fossil ignorant of the bigger picture. You see, if you disagree with PC culture in any way (even if that way is rational), you cannot win. To refute political correctness is to refute the god of the New Age; and to refute their god, even with concrete logic, is blasphemy.

This kind of blind faith in political correctness lends itself entirely to collectivism. The average person begins to think that without a viable appreciation of the philosophy, he may be left out or cast aside. Most people do not know how to function without the approval of others. Therefore, even if a father happens to have a healthy skepticism over the idea of a make-up wearing fifth-grade boy waltzing into his daughter’s school bathroom, he is likely to keep his mouth shut, because to speak out would be a risk to his position within the group, or the community.

PC Control

The prevalence of PC philosophy is not subtle. I have always found it interesting that political correctness seems to consistently support the demands of the state. Our system smothers children with it in public school, our workplaces are rife with the propaganda for fear of lawsuits and colleges are veritable breeding grounds for the PC oligarchy. Politically correct culture goes out of its way to constantly test others to make sure they are also true believers. This is exactly what is going on in the following interview with Jerry Seinfeld, who, to his credit, dashes the nonsense to the ground.

 

The truth is some discrimination is healthy, and some discord is needed for a society to remain balanced. As long as we don’t allow our disagreements to end in the physical harm of others, then those disagreements are our natural-born right. If you are a racist (this goes for non-whites as well), that’s fine. Just don’t act out your racism in a violent way around me, or I will have to put you down permanently. If you have a distaste of homosexuality (or asexuality, as seems popular nowadays), then whatever, I don’t care. You shouldn’t have to have organizations like GLAAD (formerly the Gay & Lesbian Alliance Against Defamation) in your face attempting to force you to put on a smile for gaydom, coordinate man-on-man heavy-petting protests in your favorite restaurant (Chick-fil-A) while you’re trying to eat a damn sandwich, push boys into the girl’s bathroom, or trying to shut down your favorite TV shows because the stars happen to share your views (“Duck Dynasty”).

Now, PC proponents will argue that the very existence of bigotry does harm to society as a whole, and it must be educated out of individuals. Frankly, I see that kind of utopian fascism as a far greater threat to society as a whole than bigotry ever will be.

Look at where we are today because of the PC nightmare! We have a Nation on the verge of industrial and economic collapse, partly because companies are forced by law or persuaded by government subsidies to hire people with victim group status, even if they are unqualified, while ignoring highly qualified people who just happen to have lighter skin. We have children not even old enough to discover their own inherent character being clinically diagnosed with “gender dysphoria” by a psychiatric community of quacks, which conjured most PC terminology out of thin air. We have boys who are told that they are stunted for acting out their natural male impulses and girls who are told that true femininity is weakness and that they should act more masculine. We have a mainstream culture that coddles and infantilizes young adults, young girls who think promiscuity is the key to womanhood and that motherhood is disgusting (which I find rather ironic), and young men who have no testicular fortitude and no clue how to take charge of their own lives.

The American family unit has been completely destroyed. We have women who are ashamed to set aside careers to raise children because feminism frowns upon “breeders” who bring down the whole gender. We have men who abandon their children and refuse to take responsibility. And we have a weak-minded population addicted to collective affirmation and unwilling to think outside the box for fear of being shunned and shamed. Honestly, I can’t see a single redeeming quality to political correctness other than the fact that those people who espouse it do so loudly and obnoxiously, making it easier for me to identify and avoid them or to take special note of them as an obvious zombie threat in an America swiftly declining into mundane oblivion.


    



via Zero Hedge http://ift.tt/1d2wvS4 Tyler Durden

The Chinese Dominoes Are About To Fall: Complete List Of Upcoming Trust Defaults

As has been widely reported on these pages in the past month, after a near-reality experience almost claimed the first material Chinese shadow banking default, the Chinese government and central bank did what they do best: a mysterious “white knight” emerged out of nowhere, and bailed out the Credit Equals Gold #1 Trust. A few days later, we reported that China Development Bank lent 2 billion yuan to coal company Shanxi Liansheng, which owes almost 30b yuan to lenders including banks, trusts and asset management firms. And while we know how “difficult” it was for China to do the wrong thing and encourage moral hazard, despite repeated assurances by one after another PBOC director that this time the central bank means business, we have good news: these two narrowly averted Trust defaults are just the beginning – it is all downhill from here.

As Bank of America reports in an analysis by David Cui, the Trust defaults are about to get hot and heavy. To wit:

We believe that during April to July the market may see many trust products threatening to default, especially those related to coal mines. By our estimate, the first real default most likely could happen in May with a Sichuan lead/zinc trust product worth Rmb140mn. This is because the product is relatively small (so the government may use it as a test case), the underlying asset is not attractive (so little chance of 3rd parties taking it over) and we also have heard very little on parties involved trying to work things out. Whether this will trigger an avalanche of future trust defaults remains to be seen and this presents a key risk to the market in our opinion.

 

… it’s still possible that many of the upcoming cases in Apr-July may get worked out one way or the other. Nevertheless, as we believe that many of the underlying assets of the trust products are insolvent, it’s a matter of time that many products will ultimately default, in our view. Various bail-outs will only delay the inevitable.

From BofA’s David Cui

12 potential defaults reported by the media

Table 1 summarizes the information on the 12 major potential defaults in the trust industry that have been reported by the media. Most of them are coal mine related and heavily concentrated in one area, Shanxi Province. So far it seems to us that most of them may get extended upon the due date. The only exception over the next few months appears to be a product issued by China Credit Trust for a lead and zinc miner in Sichuan, Nonggeshan. Even without any major default over the next few months, the process of debt restructuring can be messy and weigh heavily on market sentiment.

19 Feb 2014, Rmb109mn borrowed by Liansheng & arranged by Jilin Trust

  • Details: This Rmb109mn tranche is part of a six-tranche trust product worth a total of Rmb973mn arranged by Jilin Trust for Liansheng, a Shanxi coal miner. The other five tranches have matured since 2H 2013 and remain overdue.
  • Potential outcome: Repayment may be extended.
  • Reason: Liansheng is undergoing a debt restructuring coordinated by the Shanxi provincial government. 1) The provincial government plans to help out involved financial institutions to ensure the region’s access to ongoing financing. According to people close to the situation, the implicit guarantee practice will most likely continue with the Liansheng’s case. 2) Trust companies may have to follow banks to help the miner out. Banks have agreed to extend their mid/long term loans by three years. Top 3 banks have total debts of Rmb10.6bn to Liansheng; top 3 trust lenders, Rmb3.7bn.

(Shanghai Securities News, 2/11; Economic Information, 2/13)

21 Feb 2014, Rmb500mn borrowed by Liansheng & arranged by Shanxi Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the Jilin Trust case.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

07 Mar 2014, Rmb664mn borrowed by Liansheng & arranged by Changan Trust

  • Details: Other than the Rmb664mn product to mature on Mar 7, Changan Trust arranged another two products for Liansheng, totaling Rmb536mn which matured in Nov 2013. Both products remain overdue.
  • Potential outcome: repayment may be extended.
  • Reason: Same as the other Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

31 Mar 2014, Rmb196mn borrowed by Magic Property & arranged by CITIC Trust

  • Details: invested in an office building in Chongqing. The Chongqing developer ran into financial problems in mid-2013. CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.
  • Potential outcome: The developer and the trust company may share the repayment.
  • Reasons: 1) When CITIC Trust sold the product, it did not specify the underlying investment project. 2) The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.

(Source: Financial Planning Weekly, 3/6/2013; Guangzhou Daily, 4/6/2013, Boxun, 5/10/2013)

14 May 2014, Rmb1.5bn borrowed by Liansheng & arranged by China Jiangxi International Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the other three Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

30 May 2014, Rmb140mn borrowed by Nonggeshan & arranged by China Credit Trust

  • Details: invested in a lead and zinc mine in Sichuan.
  • Potential outcome: Likely to default.
  • Reasons: 1) Compared to coal mines of Zhenfu and Liansheng, the lead and zinc mine is a much less attractive asset: it is located in the mountains over 5,000 meters in altitude, inaccessible for 6 months of the year due to weather conditions, with low lead/zinc content; 2) According to an unnamed regulator, the central government is comfortable with trust defaults in the range of Rmb100-200mn.

(Source: 21st Century Business Herald, 31/7/2012; Caiing, 1/27)

25 Jul 2014, Rmb1.3bn borrowed by Xinbeifang & arranged by China Credit Trust

  • Details: Xinbeifang is another Shanxi coal miner.
  • Potential outcome: repayment may be extended.
  • Reason: Xinbeifang is negotiating with an SOE to sell some of its coal mine assets.

(Source: China Securities Journal, 1/15)

27 Jul 2014, Rmb319mn borrowed by Hongsheng & arranged by Huarong Trust

  • Details: Hongsheng is a Shanxi coal miner. Huarong sold another trust product for it which will mature in 4 September 2014, worth Rmb63mn.
  • Potential outcome: repayment may be extended.
  • Reason: Hongsheng may have assets to secure more financing. It issued these two trust products to replace another trust product that matured in Q3 2012. The owner also issued other trust products using his personal property assets as collateral and raised Rmb1.2bn.

(21st Century Business Herald, 20/12/2013)

7 Sept 2014: Rmb400mn borrowed by Zengdai & arranged by CCB Trust

  • Details: 1) The proceeds of the product were invested in financial markets. 2) Its 1st tranche, worth Rmb400mn, matured in Mar 2013 with a 38% loss vs. an expected return of 20-30%. Investors agreed to extend the maturity of the product to Sept 2014. 3) Its 2nd tranche, worth Rmb359mn, matured in June 2013 with a 31% loss vs. an expected return of 20-30%. Investors agreed to extend the maturity of the 2nd tranche to Dec 2014.
  • Potential outcome: The trust company and the investment company may share the losses.
  • Reasons: 1) The investment company refused to repay investors in full at the original due date so the trust company may have to chip in; 2) By Jan 2014, the 1st tranche reported a narrower loss of 24%, and the 2nd tranche, also a narrower loss of 13%; 3) Zengdai may pay on behalf of its investment company for reputation’s sake.

(Source: Securities Daily, 9/7/2013; CCB Trust)

20 Nov 2014, Rmb600mn borrowed by Liansheng & arranged by China Jiangxi Int’l Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the other Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

23 Dec2014: Rmb1.1bn borrowed by Xiaoyi Dewei & arranged by China Resources Trust

  • Details: Xiaoyi Dewei is a Shanxi coal miner. The trust product originally matured in Dec 2013 but repayment was extended to Dec 2014.
  • Potential outcome: Likely to default.
  • Reason: Both the miner and the trust company refused to repay investors in full at the original due date. There has been no reporting on asset sales by Xiaoyi Dewei.

(Source: Financial Planning Weekly, 11 Nov 2013)

15 Jan 2015, Rmb1.2bn borrowed by Hongsheng’s owner & arranged by Minmetals Trust

  • Details: the collateral is the Shanxi coal miner’s personal property assets.
  • Potential outcome: May be replaced by a new trust product.
  • Reason: Same as the July 2014 Rmb319mn trust product issued by Huarong Trust.

(21st Century Business Herald, 20/12/2013)

2Q/3Q 2014 – the next peak maturing period for collective trusts

We consider the trust market the most vulnerable part of the major financing channels for companies, i.e. loan, corporate bond and trust. The quality of the borrowers in the trust market tends to among the lowest. Within the trust market, collective trust products, i.e. those sold to more than one investor, tend to be risker than single trust products, i.e. those sold to a single investor. This is because investors in single trust products tend to be more substantial in resources, thus most likely more sophisticated in their risk control.

The Wind database lists close to 12,000 collective trust products, worth Rmb1.34tr, which cover roughly half of the collective trust market (Rmb2.72tr as of the end of 2013). It has reasonably good quality data series on the issuing dates and amounts raised. However, data on maturing dates are sporadic. We estimate that the average duration of the trust products is around 2 years. Based on this assumption and the issuing dates, we have mapped out a rough maturing profile of the collective trust market. As we can see from Chart 1, 2Q and 3Q this year will be the next peak maturing period for this market.

Coal mine trusts maturity schedule

We went through the offering documents of the top 200 collective trust products by size (the smallest being Rmb400mn), worth some Rmb145bn in total. They represent roughly 10% of the trust products in the Wind database and 5% of the overall collective trust market. We identified the industries of the issuers, the regions where their businesses are located and the maturity dates of the products. Table 2 summarizes the results.

We believe that coal mine trusts are the most likely to default over the coming months because 1) coal price has dropped sharply in recent quarters; 2) most of the issuers are private enterprises; and 3) they tend to be from provinces whose governments rely heavily on resources related income, e.g., Shanxi and Inner Mongolia. On the other hand, the property market has been reasonably buoyant in recent times while LGFVs generally have access to re-financing until the implicit guarantee is removed (a whole different topic worthy another report later). Based on the maturing schedule of the top 200 collective trust products, we expect more noise about coal mine trust defaults around Apr, June and July (Chart 2).

Table 3 lists the coal mine trust products that are in our study.

For the trust market, we only have data on approximately half of the collective trust market, which in turn, accounts for about a quarter of the overall trust market. So essentially, we only covered about 1/8 of the total trust market with our analysis. Single trusts are less risky than collective trusts. Nevertheless, if the solvency issue is a systemic problem as we expect, many single trusts will ultimately default by our assessment.

Our analysis has largely zoomed in on coal mine trusts because they represent the clear and present danger given how depressed the coal market has been. However, property related trusts may come under increasing pressure as we sense that the property market may be turning south in small cities. As a result, some of those related products may threaten to default reasonably soon. Then we have the big unknown – LGFV trusts. Whether and when they may default is largely a political decision in our opinion.


    



via Zero Hedge http://ift.tt/1d2tjG7 Tyler Durden

Has The World Gone Mad?

Presenting a few of tonight’s headlines…

  • *OBAMA:`THERE WILL BE CONSEQUENCES IF PEOPLE STEP OVER THE LINE’ (like last time with Syria?)
  • *U.S. WARNS OF POSSIBLE EXPLOSIVES HIDDEN IN SHOES: NBC NEWS (credible threat?)
  • *FACEBOOK TO BUY WHATSAPP FOR ABOUT $16B CASH AND STOCK ($50 per user!)
  • *U.S. COULDN’T REACH UKRAINIAN OFFICIALS IN FEW DAYS: OFFICIALS (can you hear me now?)
  • JAPAN JAN. IMPORTS RISE 25.0% Y/Y (Abenomics is nailing it)
  • *MADURO CALLS ON OPPOSITION LEADERS TO STOP VENEZUELA VIOLENCE (sounds like a plan)
  • *ABE: WANTS OPPORTUNITY FOR TALKS WITH CHINA, SOUTH KOREA (to divvy up the rest of Asia?)
  • *CNN LIES ABOUT VENEZUELA EVERY DAY: MADURO (no comment)
  • Vietnam Bans Import of Used Electronic Devices
  • *WILLIAMS: FED HAS REACHED `END OF THE LINE’ ON JOBS THRESHOLD (that didn’t last long)
  • *MADURO SAYS `IT’S YOUR LAST CHANCE OR YOU’RE TOAST’ (but you wanted peace?)
  • *MORIMOTO:BOJ TO CHECK RISKS, MAKE POLICY ADJUSTMENTS AS NEEDED (risk?)
  • *SUGA: EXPECTS IMPROVEMENT IN TRADE BALANCE IN FUTURE (any day now)
  • *OBAMA SAYS WILL SEEK COOPERATION WITH PUTIN ON UKRAINE (worked last time?)

Has the world gone mad?

 

And a few more that made us frown…

  • ABE: WILL REVISE LAW IF NECESSARY ON COLLECTIVE DEFENSE (but we thought you wanted to chat)
  • CHINA PBOC TO SELL 60B YUAN OF 14-DAY REPOS: TRADER (how’s that tightening going?)
  • WILLIAMS SAYS RATE GUIDANCE MANY YEARS IN ADVANCE `NOT HELPFUL’ (as long as IMF’s Greek 2022 GDP forecast still stands)
  • MADURO SAYS ECONOMY HAS TOO MUCH LIQUIDITY (just perplexed)
  • HOCKEY SAYS G-20 SHOULDN’T TALK IN GENERALITIES ABOUT GROWTH (What else is there?)
  • BULLARD SAYS WEATHER HASN’T LOWERED HIS ECONOMIC OUTLOOK (sigh)
  • *MCLAREN SAYS IT’S DEVELOPING ENTRY-LEVEL SPORTS CAR (makes perfect sense)
  • *PHILIPPINES FILES CASE VS IMPORTERS WHO BROUGHT IN CANADA TRASH (who else is gonna do it for minimum wage?)

 

And perhaps our favorite of the night:

NHK’s Naoki Hyakuta admits to Asahi that he “went too far” in describing some Tokyo Gov candidates as “human scum.”

 


    



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China Manufacturing PMI Misses, Tumbles To 7-Month Low

With every sub-index decreasing or deteriorating, it is no surprise that China’s HSBC Manufacturing PMI missed expectations. At 48.3, this is the lowest since July of last year with the employment sub-index the lowest since Feb 2009. Markets are not happy that the dream of a sustainable escape velocity growth miracle is not coming true and for now bad news is bad news (as The Fed’s minutes suggested they will – just as Yellen stated and the market ignored – stay the course on the taper). USDJPY and the Nikkei 225 has erased all their post-BoJ gains on this news.

 

 

USDJPY and Nikkei 225 have erased all gains post BoJ


    



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Charles Gave On Gold As A ‘Deflation’ Hedge

From Charles Gave of GaveKal

Gold As A ‘Deflation’ Hedge

Economists have had many market puzzles to ponder in this era of monetary excess, going back to Alan Greenspan’s long bond “conundrum” nearly a decade ago. The latest market conundrum is gold: why did it begin rallying on news that US liquidity growth would be slowing (the taper), and why has it remained strong despite weak global CPI prints and flagging broad money growth the world over. This is particularly hard to understand for Organization for Economic Co-operation and Development investors, who think of gold as an inflation hedge. But it is less counterintuitive for the emerging markets.

To explain, let us for simplicity’s sake divide the world into two categories: 1) those countries which have foreign exchange controls; and 2) those which do not. The first category will be comprised mostly of emerging economies, the second mostly of developed economies.

If you are a rich person in one of the countries with capital-account restrictions, it can be difficult to diversify your assets abroad. In quite a few of these countries, even if one cannot for example buy a US government bond, one can buy gold, often produced locally. So gold becomes the substitute for international assets in a diversified portfolio.

Since the monetary history of quite a few of these countries is checkered at best (hyperinflation, defaults, taxes on capital flows, devaluations, etc), gold becomes the best available hedge against bad policy, as well as against a bear market in the local stock market. And it works—see the chart of Brazil as an example.

Of course, emerging markets are often as vulnerable to the vicissitudes of foreign capital flows as they are to domestic policy. Fed policy risk offers another motive for gold-hoarding in emerging markets (EM). If US monetary policy adds to the volatility of EM exchange rates, then residents need to hedge against this—and, as mentioned, their hedging options are limited. This is how we get the bizarre situation where holding gold protects against devaluation and growth/deflationary pressures in the emerging markets.

Gold will keep rising as long as US policy is exporting volatility—we see no imminent change in this situation under Janet Yellen’s Federal Reserve.

As the French economist Frederic Bastiat told us long ago, with any economic policy, there is what we see, and what we don’t see. The markets are looking for the effects of Fed policy in key US data points, like the employment figures. Yet the exchange rates of economies that now make up a significant portion of the global growth pie—Brazil, Indonesia,  India, China, etc—are also quite relevant to the future of the financial markets in the developed world.


    



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Guest Post: Does The Trail Of Dead Bankers Lead Somewhere?

Submitted by Michael Snyder of The Economic Collapse blog,

What are we to make of this sudden rash of banker suicides?  Does this trail of dead bankers lead somewhere?  Or could it be just a coincidence that so many bankers have died in such close proximity?  I will be perfectly honest and admit that I do not know what is going on.  But there are some common themes that seem to link at least some of these deaths together. 

First of all, most of these men were in good health and in their prime working years. 

Secondly, most of these "suicides" seem to have come out of nowhere and were a total surprise to their families. 

Thirdly, three of the dead bankers worked for JP Morgan. 

Fourthly, several of these individuals were either involved in foreign exchange trading or the trading of derivatives in some way.  So when "a foreign exchange trader" jumped to his death from the top of JP Morgan's Hong Kong headquarters this morning, that definitely raised my eyebrows. 

These dead bankers are starting to pile up, and something definitely stinks about this whole thing.

What would cause a young man that is making really good money to jump off of a 30 story building?  The following is how the South China Morning Post described the dramatic suicide of 33-year-old Li Jie…

An investment banker at JP Morgan jumped to his death from the roof of the bank's headquarters in Central yesterday.

 

Witnesses said the man went to the roof of the 30-storey Chater House in the heart of Hong Kong's central business district and, despite attempts to talk him down, jumped to his death.

If this was just an isolated incident, nobody would really take notice.

But this is now the 7th suspicious banker death that we have witnessed in just the past few weeks

– On January 26, former Deutsche Bank executive Broeksmit was found dead at his South Kensington home after police responded to reports of a man found hanging at a house. According to reports, Broeksmit had “close ties to co-chief executive Anshu Jain.”

 

– Gabriel Magee, a 39-year-old senior manager at JP Morgan’s European headquarters, jumped 500ft from the top of the bank’s headquarters in central London on January 27, landing on an adjacent 9 story roof.

 

– Mike Dueker, the chief economist at Russell Investments, fell down a 50 foot embankment in what police are describing as a suicide. He was reported missing on January 29 by friends, who said he had been “having problems at work.”

 

– Richard Talley, 57, founder of American Title Services in Centennial, Colorado, was also found dead earlier this month after apparently shooting himself with a nail gun.

 

– 37-year-old JP Morgan executive director Ryan Henry Crane died last week.

 

– Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, although the circumstances surrounding his death are still unknown.

So did all of those men actually kill themselves?

Well, there is reason to believe that at least some of those deaths may not have been suicides after all.

For example, before throwing himself off of JP Morgan's headquarters in London, Gabriel Magee had actually made plans for later that evening

There was no indication Magee was going to kill himself at all. In fact, Magee’s girlfriend had received an email from him the night before saying he was finishing up work and would be home soon.

And 57-year-old Richard Talley was found "with eight nail gun wounds to his torso and head" in his own garage.

How in the world was he able to accomplish that?

Like I said, something really stinks about all of this.

Meanwhile, things continue to deteriorate financially around the globe.  Just consider some of the things that have happened in the last 48 hours…

-According to the Bangkok Post, people are "stampeding to yank their deposits out of banks" in Thailand right now.

-Venezuela is coming apart at the seams.  Just check out the photos in this article.

-The unemployment rate in South Africa is above 24 percent.

-Ukraine is on the verge of total collapse

Three weeks of uneasy truce between the Ukrainian government and Western-oriented protesters ended Tuesday with an outburst of violence in which at least three people were killed, prompting a warning from authorities of a crackdown to restore order. Protesters outside the Ukrainian parliament hurled broken bricks and Molotov cocktails at police, who responded with stun grenades and rubber bullets.

-This week we learned that the level of bad loans in Spain has risen to a new all-time high of 13.6 percent.

-China is starting to quietly sell off U.S. debt.  Already, Chinese U.S. Treasury holdings are down to their lowest level in almost a year.

-During the 4th quarter of 2013, U.S. consumer debt rose at the fastest pace since 2007.

-U.S. homebuilder confidence just experienced the largest one month decline ever recorded.

-George Soros has doubled his bet that the S&P 500 is going to crash.  His total bet is now up to about $1,300,000,000.

For many more signs of financial trouble all over the planet, please see my previous article entitled "20 Signs That The Global Economic Crisis Is Starting To Catch Fire".

Could some of these deaths have something to do with this emerging financial crisis?

That is a very good question.

Once again, I will be the first one to admit that I simply do not know why so many bankers are dying.

But one thing is for certain – dead bankers don't talk.

Everyone knows that there is a massive amount of corruption in our banking system.  If the truth about all of this corruption was to ever actually come out and justice was actually served, we would see a huge wave of very important people go to prison.

In addition, it is an open secret that Wall Street has been transformed into the largest casino in the history of the world over the past several decades.  Our big banks have become more reckless than ever, and trillions of dollars are riding on the decisions that are being made every day.  In such an environment, it is expected that you will be loyal to the firm that you work for and that you will keep your mouth shut about the secrets that you know.

In the final analysis, there is really not that much difference between how mobsters operate and how Wall Street operates.

If you cross the line, you may end up paying a very great price.


    



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FOMC Minutes and Thoughts on Forward Guidance

As high income economies improve and the financial sectors stabilize, central bankers understandably and rightly, want to move away from the unorthodox policies that were necessary to avoid an even larger collapse and more suffering.  At the same time, they want to reassure investors, businesses and households that they do not intend on increasing interest rates any time soon.  The process by which central banks do this has been dubbed forward guidance.

 

Initially, as the Bank of Canada Governor, Carney used a date approach.  This approach was eschewed by the Bank of England and the Federal Reserve for more a more data specific approach.  Both central banks picked an unemployment rate, 7.0% and 6.5% respectively.  To varying degrees, both central banks noted, for anyone who wanted to listen, that these were thresholds for which policy would be re-examined, not triggers a for a change in policy.  

 

Both of the thresholds are being approached, dare one say before most observers, including those at the central banks expected.  The substance of forward guidance must evolve with economic conditions. Those who argued that the Carney would ditch forward guidance confuse the communication mechanism with its substance.  The FOMC minutes for last month’s meeting show that US officials are also wrestling with the evolution of its forward guidance.  

 

There seems to be a finite number of possible tactics.  Officials could, for example, simply lower the current thresholds.  This, however, may undermine the credibility of forward guidance.   Another alternative could be to adopt a more qualitative approach.  This is what the BOE seems to be doing.  

 

A third possible course for the Federal Reserve is to emphasize its third mandate:  financial stability.   The problem with this is that if financial stability was threatened the Fed would more likely have to be accommodative than restrictive.   A fourth option would be to adopt a different threshold, to wit:  The FOMC does not anticipate the need to increase interest rates while the core PCE deflator is below, say 1.7% (it stood at 1.2% at the end of last year).   The fifth option is to find a different channel to communicate one’s intention.  The Federal Reserve can make it point, for example, through its quarterly interest rate forecasts.   

 

No doubt with some many business people and economists and various interests and sensibilities represented, there are bound to be advocates of each course.  Judging from the January FOMC meeting, it is not clear the Fed has decided yet.    Put in a larger context, we suspect the Fed will opt for the more qualitative approach and placing more emphasis on signaling function of its interest rate forecasts. 

 

In some ways, though, this evolution of the forward guidance communication style is largely a question of adaptation not speciation.  This is also an important take away from the FOMC minutes.  Not only did Bernanke put the Fed on the tapering path, but also raised the cost of deviating from that path.  

 

Even before the minutes, it seemed clear to us, that the bar to stop tapering or speed it up (which seems somewhat less relevant now in the face of the dramatic slowing of the US economy to something probably around 1.5% annualized, based on the current information set and conservative projections) is set high.   The minutes reinforce this sense.  

 

The key though is not how the economy does.  Rather it is what the economy does relative to the Fed’s outlook.  The minutes make clear that last month, officials recognized that the pace of the economy in H2 were due to temporary factors that would likely be reversed in the H1 2014.  This means that there should be little doubt that the Fed continues to taper.  Forward guidance is the communication style to manage expectations.  Tapering, that is policy.  


    



via Zero Hedge http://ift.tt/1gXGts4 Marc To Market