Fukushima Debris “Island” The Size Of Texas Near US West Coast

While it took Japan over two years to admit the Fukushima situation on the ground is “out of control“, a development many had predicted for years, a just as important topic is what are the implications of this uncontrolled radioactive disaster on not only the local environment and society but also globally, particularly Japan’s neighbor across the Pacific – the US.

To be sure, there has been much speculation, much of it unjustified, in the past two years debating when, how substantial and how acute any potential debris from Fukushima would be on the US. Which is why it was somewhat surprising to see the NOAA come out with its own modeling effort, which shows that not only “some buoyant items first reached the Pacific Northwest coast during winter 2011-2012” but to openly confirm that a debris field weighing over 1 million tons, and larger than Texas is now on the verge of hitting the American coastline, just west off the state of California.

Obviously, the NOAA in releasing such a stunner could well be hammered by the administration for “inciting panic” which is why it caveated its disclosure carefully:

Many variables affect where the debris will go and when. Items will sink, disperse, and break up along the way, and winds and ocean currents constantly change, making it very difficult to predict an exact date and location for the debris’ arrival on our shores.

 

The model gives NOAA an understanding of where debris from the tsunami may be located today, because it incorporates how winds and ocean currents since the event may have moved items through the Pacific Ocean. This model is a snapshot of where debris may be now, but it does not predict when debris will reach U.S. shores in the future. It’s a “hindcast,” rather than a “forecast.” The model also takes into account the fact that winds can move different types of debris at different speeds. For example, wind may push an upright boat (large portion above water) faster than a piece of lumber (floating mostly at and below the surface).

Still despite this “indemnity” the NOAA does come stunningly close with an estimate of both the location and size of the debris field. One look at the map below shows clearly why, while the Fed may have the economy and markets grasped firmly in its central-planning fist, when it comes to the environment it may be time to panic:

Source: NOAA

Some of the disclosures surrounding the map:

  • Japan Ministry of the Environment estimates that 5 million tons of debris washed into the ocean.
  • They further estimated that 70% of that debris sank near the coast of Japan soon after the event.
  • Model Results: High windage items may have reached the Pacific Northwest coast as early as winter 2011-2012.
  • Majority of modeled particles are still dispersed north and east of the Hawaiian Archipelago.
  • NOAA expects widely scattered debris may show up intermittently along shorelines for a long period of time, over the next year, or longer.

In light of these “revelations” which come not from some tinfoil website but the Department of Commerce’s National Oceanic and Atmospheric Administration, it becomes clear why there has been virtually zero mention of any of these debris traffic patterns on the mainstream media in recent history, or ever.

Appropriately enough, since the US media will not breach this topic with a radioactive 10 foot pole, one has to go to the Russian RT.com website to learn some more:

Over a million tons of Fukushima debris could be just 1,700 miles off the American coast, floating between Hawaii and California, according to research by a US government agency.

 

 

The National Oceanic and Atmospheric Administration (NOAA) recently updated its report on the movement of the Japanese debris, generated by the March 2011 tsunami, which killed 16,000 people and led to the Fukushima nuclear power plant meltdown.

 

Seventy percent of an estimated 5 million tons of debris sank near the coast of Japan, according to the Ministry of Environment. The rest presumably floated out into the Pacific.

 

While there are no accurate estimates as to where the post-tsunami junk has traveled so far, the NOAA has come up with a computer model of the debris movement, which gives an idea of where its highest concentration could be found.

Having released the radioactive genie from the bottle, the NOAA is now doing all it can to avoid the inevitable social response. RT has more:

The agency was forced to alleviate the concerns in an article saying there was “no solid mass of debris from Japan heading to the United States.”

 

“At this point, nearly three years after the earthquake and tsunami struck Japan, whatever debris remains floating is very spread out. It is spread out so much that you could fly a plane over the Pacific Ocean and not see any debris since it is spread over a huge area, and most of the debris is small, hard-to-see objects,” NOAA explains on its official webpage.

 

The agency has stressed its research is just computer simulation, adding that “observations of the area with satellites have not shown any debris.”

 

 

Scientists are particularly interested in the organisms that could be living on objects from Japan reaching the west coast.

 

“At first we were only thinking about objects like the floating docks, but now we’re finding that all kinds of Japanese organisms are growing on the debris,” John Chapman of the Marine Science Center at Oregon State University told Fox News.

 

“We’ve found over 165 non-native species so far,” he continued. “One type of insect, and almost all the others are marine organisms … we found the European blue mussel, which was introduced to Asia long ago, and then it grew on a lot of these things that are coming across the Pacific … we’d never seen it here, and we don’t particularly want it here.”

What is the worst-case scenario:

The worst-case scenario would be that the trash is housing invasive organisms that could disrupt the local environment’s current balance of life. Such was the case in Guam, where earlier this year it was announced that the US government intended to parachute dead mice laced with sedatives on to the island in order to deal with an invasive species of brown tree snake that was believed to have been brought to the American territory on a military ship over 60 years ago. In a little over half a century, a few snakes spawned what became an estimated 2 million animals, the likes of which ravaged the island’s native bird population and warranted government intervention.

 

Other concerns such as radiation, meanwhile, have been downplayed. On its website, the NOAA says, “Radiation experts agree that it is highly unlikely that any tsunami-generated marine debris will hold harmful levels of radiation from the Fukushima nuclear emergency.”

 

Independent groups like the 5 Gyres Institute, which tracks pollution at sea, have echoed the NOAA’s findings, saying that radiation readings have been “inconsequential.” Even the release of radioactive water from the Fukushima nuclear reactor shouldn’t be a grave concern, since scientists say it will be diluted to the point of being harmless by the time it reaches American shores in 2014.

Which is great news: since even the worst case scenario is inconsequential, we expect the broader media will promptly report on the NOAA’s findings: after all, the general public surely has nothing to fear.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/vaZl1vxAC2k/story01.htm Tyler Durden

Debt Deflation and the Illusion of Wealth

Listening to our friends on the financial media, one is tempted to think that skillful investors are somehow able to dodge the flaming asteroids of inflation as they fall to earth.  See the last few minutes of the latest installment of the David Twohy film “Riddick” starring Vin Diesel for the visuals.  

The idea of an object falling from space as a metaphor for inflation may surprise some readers of Zero Hedge, but our friend Marc Faber likes to remind us there are many ways to lose money from inflation.  Chief among them are asset bubbles instigated by the monetary emissions of reckless central bankers who pretend, at least, to believe that they can solve problems like unemployment by merely debasing our beloved fiat currency.

The whole notion of value and wealth in a fiat monetary system is relative, especially following a major catastrophe such as the Second World War.  The history of the US of course paints the WWII period as a victory for democracy, but the fact is that the disruption and dislocation caused by that conflict and the subsequent surge in population we loving refer to as the baby boom is still being felt.  My friend and mentor Alex Pollock, Resident Scholar at American Enterprise Institute, puts it nicely in a draft essay entitled appropriately “Wealth” and Illusion:

“Before 2007, central bankers convinced themselves they had created a new era, “The Great Moderation,” but what they actually presided over was the Era of Great Bubbles.  In the U.S. we had first the Great Overpaying for Tech Stocks in the 1990s, then the Great Leveraging of Real Estate in the 2000s,” Pollock writes.  “Inevitably following each of the great bubbles was a price shrivel.  Then many commentators talked about how people “lost their wealth,” with statements like “in the housing crisis households lost $7 trillion in wealth.”  But since the $7 trillion was never really there in the first place, it wasn’t really lost.” 

To the real estate bubble of the 2000s, we could add the more recent rebound of the housing sector and stock prices.  But in truth, if you take the distressed transactions out of the time series, the rebound in home prices over the past 24 months is probably in single digits.  Meaning no offense to the investors in Invitation Homes 2013-SFR1, a rent securitization collateralized by one floating rate loan secured by 3,207 single family rental residential properties, the peak in US home prices in this “cycle” probably coincided with the initial public offering of RMAX.  

More to the point of wealth illusions, consider the latest run up in the Dow and other equity market indices.  Somehow commentators in the financial media are able to talk into the camera with a straight face about investor gains in stocks, this even as the central bank is robbing consumers of real purchasing power via a steady inflation of the currency.  If the major stock market indices are at all-time highs, but the supposed risk free rate is zero, what does this imply?  Are we all wealthier because the Dow is at 15,000 or is the whole point of quantitative easing merely to boost “confidence” as the Fed’s own policy statements suggest?  Again Pollock:

“Common calculations of aggregate ‘wealth’ take the entire stock of an asset class and multiply it by the bubble prices, on the theory that financial value is what you can sell something for.  Of course, some clever or lucky individuals succeed in selling at the bubble highs, but the aggregate bubble prices can never be realized by sale.  As soon as any very great number of the owners of a bubble asset try to sell it, the bubble collapses, the evanescent “wealth” disappears, and the long-term trend reasserts itself.”

And what is the long term trend for wealth creation in America?  Pollock suggests that it is about 2% a year in real, inflation adjusted terms.  “The rate of increase may seem modest, but in fact represents a miracle of the market economy,” he notes. While this rate of increased in aggregate wealth may reassure those who care about long terms trends, it also suggests that the latest increase in equity market valuations are greatly exaggerated and probably not sustainable.

Of course the neo-Keynesian socialists who dominate the economics profession like us all to believe that the “wealth effect” of rising home or stock prices is real, but in fact, like most economic notions, it is merely an illusion foisted upon all of us by a servile financial media. Income and production, not asset prices, are the real bases of wealth.  

If you tell people the truth; that real wealth can only ever rise 2% per annum on average, nobody would give a hoot about the global equity or bond markets.  Humans like dogs and fish, prefer to chase the shiny object rather than let time and hard work grow wealth slowly.  The whole notion of the “wealth effect” is a canard and should not be mistaken with real affluence. 

Home prices, as with aggregate wealth, only really ever increase at the rate of population growth.  So if the population of households and home owners is actually declining, as it is today, what does this imply for future home price appreciation and personal wealth?  If Case-Shiller is rising at a 12% annual rate, does this not imply that home prices must soon decline to be consistent with long-term price trends?  

But as Pollock notes, “per capita wealth of the sustainable kind grows at 2%, with the inflations and shrivels of bubbles netting themselves out.  With this trend increase, in a lifetime of 83 years, Americans will on average grow five times as wealthy.  Along the way, they should avoid confusing the ‘wealth’ of bubbles with actual aggregate wealth.” 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/TOElwl90wmc/story01.htm rcwhalen

Frontrunning: November 6

  • Christie Sets Himself Up for Run in 2016 (WSJ)
  • De Blasio Elected Next New York City Mayor in Landslide (WSJ)
  • Hilsenrath: Fed Study: Rate Peg Off Mark (WSJ)
  • MF Global Customers Will Recover All They Lost (NYT) – amazing what happens when you look under the rug
  • Virginia, Alabama Voter Choices Show Tea Party Declining (BBG)
  • Explosions kill 1, injure 8 in north China city (Reuters)
  • Toyota boosts full-year guidance as weak yen drives revenues (FT)
  • Starbucks wants to recruit 10,000 vets, spouses to its ranks (Reuters)
  • U.S. Economy Slack Justifies Stimulus, Top Fed Staff Papers Show (BBG)
  • Israel set to become major gas exporter (FT)
  • Apple Adds Suppliers to Boost Smartphone, Tablet Production (WSJ)
  • China’s Slower Growth Puts a Drag on Western Profits (WSJ)
  • Brent Crude Traders Claim Proof BFOE Boys Rigged Market (BBG)
  • Young Avoid New Health Plans (WSJ)
  • Apple reveals government data request figures (Telegraph)
  • Facebook Misadventure Means Scrutiny on NYSE With Twitter (BBG)
  • New York Nerds Sift Citi Bike Data to Solve Availability (BBG)
  • IRS Cracks Down on Breaks Tied to Land of Rich Americans (BBG)

 

Overnight Media Digest

WSJ

* Republican Governor Chris Christie easily won re-election in New Jersey, while Democrat Terry McAuliffe won in Virginia, a decision that sent mixed messages to both parties about their political strengths.

* On the day he coasted to re-election as governor of New Jersey, Republican Chris Christie spent his time talking about issues facing the entire country, setting himself up for a possible 2016 White House bid.

* Elite MBAs are increasingly heading to work in technology over finance as the lingering aftereffects of the financial crisis-along with Wall Street’s long hours and scaled-back pay-send newly minted MBAs elsewhere.

* The Federal Reserve could help drive down unemployment faster if it promised to keep short-term interest rates near zero for longer than currently envisioned by officials or investors, according to a new research paper by a top central-bank staff member.

* Shares of Colombian airline Avianca Holdings are due to begin trading Wednesday on the New York Stock Exchange, capping a turnaround 10 years in the making by investor Germán Efromovich.

* J.C. Penney is expected to say this week that its sales turned positive in October – but that won’t quell worries about the retailer’s financial health. Gross margin and cash burn remain concerns.

* EU regulators are poised to levy massive fines against a group of banks tied to their alleged attempts to manipulate benchmark interest rates, according to officials briefed on the discussions.

* Bart Chilton, the animated and outspoken member of the Commodity Futures Trading Commission who has agitated for tougher Wall Street regulation, is stepping down from his post after he secured agency support for trading restraints. Chilton, a Democrat, announced his departure Tuesday ahead of the agency’s 3-1 vote to propose restraints aimed at curbing speculation in commodities such as oil, gold and sugar.

* Demand Media Inc showed it is moving forward on a planned spin off of its domain services business, disclosing both the name of the new company and the appointment of a senior executive in the domain services unit to be its chief executive.

 

FT

Electric car maker Tesla Motors Inc reported third-quarter deliveries of its Model S below analysts’ expectations, pushing shares down more than 12 percent in after-the-bell trade on Tuesday.

JT Wang, chairman and chief executive of Taiwan’s Acer , said he would step down as a continuing decline in global demand for PCs pushed the computer maker into further losses.

Rupert Murdoch’s 21st Century Fox Inc reported quarterly earnings below analysts’ estimates on Tuesday, hurt by investments in new sports channel and a weaker performance from its movie studio.

Dahabshiil, Africa’s biggest money transfer company, has won an injunction to stop Barclays Plc closing its account until the conclusion of a full trial, expected next year.

Big global oil companies are under pressure from investors to curb their vast capital spending programmes and return more cash to shareholders.

Encana Corp, Canada’s largest natural gas producer, said on Tuesday it would cut capital spending, workforce and dividends as it looks to shift to oil production to bolster its finances.

Deutsche Bank’s co-CEO Jürgen Fitschen was named on Monday as a suspect in a investigation into falsifying evidence, as a decade-long civil suit brought by the media empire Kirch Group continues to cast a shadow over the lender.

 

NYT

* A federal bankruptcy judge cleared the way for brokerage firm MF Global’s roughly 20,000 customers to collect their full $1.6 billion in vanished money, covering the remaining shortfall.

* The government’s $1.2 billion settlement with SAC Capital Advisors set a record for insider trading penalties.

* The Commodity Futures Trading Commission on Tuesday voted 3 to 1 to limit the size of any trader’s footprint in the commodities market. Gary Gensler, the chairman of the commission, said on Tuesday that the new position limits would “help to protect the markets both in times of clear skies, price discovery functions, certainly, as well as when there’s a storm on the horizon.”

* Ford’s plant in Genk, Belgium, is scheduled to close at the end of the year, but only after a long, bitter struggle that cost the company $750 million.

* Tesla Motors said it narrowed its third-quarter loss compared with the same per
iod a year ago, as it sold more Model S all-electric luxury sedans. But Tesla said its fourth-quarter earnings would be similar to the third quarter as it continues to invest in research and development and build infrastructure.

* CBS News, under fire from critics who dispute details in a “60 Minutes” report on the Benghazi attacks last year that was broadcast on Oct. 27, aggressively defended the report’s accuracy on Tuesday and the account of its main interview subject.

* On a day when consumers in Washington State were voting on whether to require food companies to label products containing genetically engineered ingredients, Cargill announced that it would begin labeling packages of ground beef containing what is colloquially known as pink slime.

* New York state financial regulators have subpoenaed about 20 companies that help New York’s pension trustees decide how to invest the billions of dollars under their control to determine whether any outside advice is clouded by undisclosed financial incentives or other conflicts of interest.

* The private equity firm Brentwood Associates has won the bidding war for the Allen Edmonds Corp, the high-end men’s shoemaker, ending a sale process that included suitors like Men’s Wearhouse.

* Endo Health Solutions, a health care company known for its pain medication, has reached a deal to acquire a Canadian specialty drug company, Paladin Labs, for $1.6 billion in stock and cash.

 

Canada

THE GLOBE AND MAIL

* U.S. giant Verizon Communications Inc appears to be taking a second look at the Canadian market after hiring a consultant to lobby the federal government on its telecommunications policy.

* The premiers of British Columbia and Alberta have reached a framework for an agreement to satisfy British Columbia’s five conditions for supporting oil pipeline development in the province, though they agree work remains to be done to ensure British Columbia gets its “fair share” of revenues from such projects.

Reports in the business section:

* Inventory levels are creeping up in Canada’s most populous city Toronto and a large number of new towers are still projected to come on stream next year.

* Canada’s oil industry is producing more greenhouse gas emissions per barrel than it did five years ago, despite Alberta regulations aimed at curbing them and growing political pressure on the industry from governments in the United States and Europe concerned about climate change.

NATIONAL POST

* Amid growing concerns about Toronto Mayor Rob Ford’s ability to do his job, councillors are mounting an effort to curb his power at city hall, and to convince him to take a leave.

* After more than two weeks of startling, acrimonious and sometimes emotional debate, the Senate of Canada on Tuesday suspended three of its members – Pamela Wallin, Mike Duffy and Patrick Brazeau – without pay for the next two years.

FINANCIAL POST

* Waterloo, Ontario-based software company Open Text Corp announced on Tuesday that it was buying cloud technology provider GXS Group Inc in a deal worth $1.17 billion.

* Rogers Communications Inc confirmed on Tuesday that it has cut close to 100 jobs at its media division. The Toronto-based company laid off 94 employees, spokeswoman Andrea Goldstein said, adding that represents less than 2 percent of its workforce of about 5,400.

 

China

SHANGHAI SECURITIES NEWS

– Wu Jinglian, senior research fellow for the State Council Developmental Research Centre, said he expects a major reform breakthrough at the upcoming 3rd Party Plenum.

CHINA SECURITIES JOURNAL

– For the first three quarters of this year, the net profit of 19 Chinese listed brokerage firms rose 35.44 percent year-on-year to 19.8 billion yuan ($3.25 billion), in part due to an income increase in asset management business.

– Carbon markets in Beijing, Shanghai and Guangdong are expected to start trading by the end of this year to reduce the overall cost of emission reduction and thereby reduce emissions, said Xie Zhenhua, vice-director of the National Development and Reform Commission, on Tuesday at a conference.

CHINA DAILY

– China’s top climate negotiator has said he expects Chinese pollution to ease in five to 10 years.

CHINA BUSINESS NEWS

– China’s CPI in October is likely to increase by 3.2 percent year-on-year, according to a survey of 20 economists conducted by China Business News.

PEOPLE’S DAILY

– After 30 years of rapid development, environmental issues, such as air pollution have become not only economic and social problems, but a political issue, said a commentary in the paper that serves as the government’s mouthpiece.

SHANGHAI DAILY

– Sellers of Gannan navel oranges from Jiangsu province falsely labelled their fruit as imported from Australia or the U.S. after domestic sales tanked on reports they contained cancer-causing chemical dyes, according to official statements.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Cardinal Health (CAH) upgraded to Buy from Neutral at Sterne Agee
Encana (ECA) upgraded to Hold from Sell at Deutsche Bank
Encana (ECA) upgraded to Neutral from Underperform at BofA/Merrill
Endo Health (ENDP) upgraded to Hold from Sell at Cantor
Endo Health (ENDP) upgraded to Neutral from Underweight at Piper Jaffray
Hancock Holding (HBHC) upgraded to Buy from Neutral at SunTrust
Host Hotels (HST) upgraded to Buy from Neutral at SunTrust
Interactive Intelligence (ININ) upgraded to Outperform from Market Perform at Northland
Office Depot (ODP) upgraded to Buy from Neutral at B. Riley
Pike Electric (PIKE) upgraded to Buy from Neutral at Janney Capital
Ryanair (RYAAY) upgraded to Buy from Neutral at Nomura
Southern Copper (SCCO) upgraded to Market Perform from Underperform at Cowen
T-Mobile (TMUS) upgraded to Buy from Hold at Canaccord

Downgrades

AMR Corp. (AAMRQ) downgraded to Neutral from Overweight at JPMorgan
Advisory Board (ABCO) downgraded to Market Perform from Outperform at Raymond James
AerCap (AER) downgraded to Underperform from Buy at BofA/Merrill
Buffalo Wild Wings (BWLD) downgraded to Hold from Buy at Miller Tabak
ExlService (EXLS) downgraded to Market Perform from Outperform at William Blair
Expeditors (EXPD) downgraded to Neutral from Buy at Goldman
Halcon Resources (HK) downgraded to Hold from Buy at Canaccord
LeapFrog (LF) downgraded to In-Line from Outperform at Imperial Capital
Maxim Integrated (MXIM) downgraded to Neutral from Buy at SunTrust
Penn National (PENN) downgraded to Sector Perform from Outperform at RBC Capital
Pioneer Natural (PXD) downgraded to Neutral from Buy at Sterne Agee
Red Robin (RRGB) downgraded to Underperform from Neutral at BofA/Merrill
Tornier (TRNX) downgraded to Sector Perform from Outperform at RBC Capital
Unilever (UN) downgraded to Neutral from Buy at Nomura
VIVUS (VVUS) downgraded to Neutral from Buy at BofA/Merrill
ZAGG (ZAGG) downgraded to Neutral from Overweight at JPMorgan

Initiations

Bruker (BRKR) initiated with an Overweight at Morgan Stanley
Magnum Hunter (MHR) re-initiated with an In-Line at Imperial Capital
Morningstar (MORN) initiated with a Market Perform at Keefe Bruyette
Pattern Energy (PEGI) initiated with an Outperform at BMO Capital
Pattern Energy (PEGI) initiated with an Outperform at RBC Capital
Rogers Communications (RCI) initiated with an Equal Weight at Barclays
Shaw Communications (SJR) initiated with an Equal Weight at Barclays
TELUS (TU) initiated with an Overweight at Barclays
TG Therapeutics (TGTX) initiated with a Buy at MLV & Co.

HOT STOCKS

Columbia Property Trust (CXP) sold 18 properties for $521.5M
Liberty Global (LBTYA) on track for target of $3.5B of buybacks by mid-2015
SM Energy (SM) to divest Anadarko Basin assets
VMware (VMW), Mirantis announced partnership
M/A-Com (MTSI) to acquire Mindspeed Technologies (MSPD) for $5.05 per share
Amdocs (DOX) to acquire Celcite for $129M cash

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Humana (HUM), Delek Logistics (DKL), Mindspeed (MSPD), SandRidge Energy (SD), RenaissanceRe (RNR), HCI Group (HCI), Zillow (Z), URS Corporation (URS), ONEOK (OKE), Emerald Oil (EOX), Jazz Pharmaceuticals (JAZZ), Life Technologies (LIFE), Seattle Genetics (SGEN), ServiceSource (SREV), Web.com (WWWW), Fossil (FOSL), DaVita (DVA), DealerTrack (TRAK), Tesla (TSLA), Hain Celestial (HAIN), Ternium (TX)

Companies that missed consensus earnings expectations include:
Endeavour (END), Global Geophysical (GGS), Liberty Global (LBTYA), Ormat Technologies (ORA), Energy Transfer Equity (ETE), J2 Global (JCOM), LSB Industries (LXU), Medifast (MED), C.H. Robinson (CHRW), MAKO Surgical (MAKO),  Live Nation (LYV), Amdocs (DOX), OfficeMax (OMX), VIVUS (VVUS), Office Depot (ODP), 21st Century Fox (FOXA)

Companies that matched consensus earnings expectations include:
Papa John’s (PZZA), SciQuest (SQI), Brookfield Residential (BRP), M/A-COM (MTSI), ONEOK Partners (OKS), Frontier Communications (FTR), Cadence (CADX), Limelight Networks (LLNW)

NEWSPAPERS/WEBSITES

  • EU antitrust regulators are poised to levy large fines against six global banks (CRARY, SCGLY, DB, HBC, RBS, JPM) tied to their alleged attempts to manipulate benchmark interest rates, sources say, the Wall Street Journal reports
  • J.C. Penney (JCP) is expected to say this week that its sales turned positive in October, but that won’t quell worries about the retailer’s financial health. The concern is that sales won’t rise fast enough or be profitable enough to head off the need to raise more cash next year, the Wall Street Journal reports
  • Microsoft (MSFT) narrowed its list of external candidates to replace CEO Ballmer to about five people, including Ford Motor (F) CEO Mulally and former Nokia (NOK) CEO Elop, sources say, Reuters reports
  • Starbucks (SBUX) would commit to hiring at least 10,000 veterans and spouses of active military in five years, Reuters reports
  • The U.S. oil industry (XOM, CVX,TSO), riding a domestic energy boom, is preparing to challenge restrictions on crude exports, possibly by arguing that limits designed to keep petroleum in America may violate international trade rules, Bloomberg reports
  • Wells Fargo (WFC) is among firms facing federal scrutiny of mortgage-bond sales under a 1989 law the government is using to extend probes of banks’ roles in the credit crisis, sources say, Bloomberg reports

SYNDICATE

Arc Logistics (ARCX) 6M share IPO priced at $19.00
Barracuda Networks (CUDA) 4.1M share IPO priced at $18.00
Blue Capital (BCRH) 6.25M share IPO priced at $20.00
Boise Cascade (BCC) files to sell 8M shares of common stock for holders
ChannelAdvisor (ECOM) 5M share Secondary priced at $34.00
Diamondback Energy (FANG) files to sell 17.46M shares for holders
InterMune (ITMN) 6.5M share Secondary priced at $13.00
Karyopharm (KPTI) 6.8M share IPO priced at $16.00
Keating Capital (KIPO) announces rights offering of 2.95M shares of common stock
Seacoast Banking (SBCF) commences registered direct offering of $75M of common stock
Wix.com (WIX) 7.7M share IPO priced at $16.50
ZELTIQ Aesthetics (ZLTQ) files to sell 4.5M shares of common stock for holders
Zogenix (ZGNX) 26.67M share Secondary priced at $2.25


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/4OUZaVMssAg/story01.htm Tyler Durden

Overnight JPY Momentum Ignition Leads To Equity Futures Ramp

It was the deep of illiquid night when the momentum ignition trading algos struck. Out of the blue, a liftathon in all JPY crosses without any accompanying news sent the all important ES leading EURJPY surging by 50 pips, which in turn sent both the Nikkei up over 1% in minutes, and led to an E-Mini futures melt up of just about 8 points just when everyone was going to sleep.

All of this happened completely independent of the actual data, which was chiefly European retail sales which missed (-0.6%, Exp. 0.4%, prior revised lower to 0.5%), Eurozone Service PMI which dropped (from 52.2 to 51.6) but beat expectations of 50.9 (notably the Spanish Service PMI of 49.6, up from 49.0 saw its employment index drop from 46.5 to 45.3, the lowest print since June), and finally, German Factory Orders which surged from last month’s -0.3% to +3.3% in September. And while all this impacted the EUR modestly stronger, it had little if any residual effect on the ES. The bigger question is whether these slightly stronger than expected data point will offset the ECB’s expected dovishness when Mario takes to the mic tomorrow).

Looking at today’s calendar, there is a bit of a mid-week lull before we head into the business end of the week (ECB meeting tomorrow and payrolls/Bernanke on Friday). With largely irrelevant European data out of the way the main remaining US-based data releases are mortgage applications and the leading index. The Cleveland Fed’s Pianalto speaks on housing and the economy towards the end of the US trading day.

Market Recap from RanSquawk:

Despite the looming risk event (ECB policy meeting), stocks traded higher, as market participants used yesterday’s sell-off as an opportunity to re-establish longs. At the same time, Bunds also remained bid, albeit marginally but were again dragged lower by Gilts which underperformed the benchmark German equivalent following the release of yet more solid UK macroeconomic data (Manufacturing/Industrial Production). Looking elsewhere, the release of the latest Eurozone Retail Sales report, as well as Eurozone based services PMIs failed to have a meaningful impact on the price action, which remained range bound for much of the session. Going forward, market participants will get to digest the release of the latest Challenger Job Cuts report, Weekly DoE data and also earnings by Time Warner and QUALCOMM.

Overnight bulletin summary from Bloomberg and Ran:

  • Eurozone Retail Sales (Sep) M/M -0.6% vs. Exp. -0.4% (Prev. 0.7%, Rev. to 0.5%) and Eurozone Services PMI (Oct F) M/M 51.6 vs. Exp. 50.9 (Prev 52.2).
  • German Factory Orders (Sep) M/M 3.3% vs. Exp. 0.5% (Prev. -0.3%)
  • UK Industrial Production (Sep) M/M 0.9% vs. Exp. 0.6% (Prev. -1.1%) and UK Manufacturing Production (Sep) M/M 1.2% vs. Exp. 1.1% (Prev. -1.2%)
  • Treasuries steady, 10Y yield holding above 100-DMA, as market waits GDP and nonfarm payrolls on Friday for more clues on possible Fed tapering; ECB rate decision due tomorrow.
  • A pair of research papers by high-ranking Fed staffers make the economic case for prolonging stimulus by targeting a lower unemployment rate and a bigger window for inflation
  • SF Fed’s John Williams said economic growth in recent months has fallen short of his expectations, partially eroding his confidence gains in the  labor market will endure without monetary stimulus
  • German factory orders increased more than estimated 3.3% in September, more than forecast
  • U.K. industrial production rose 0.9% in September, more than economists forecast, helped by a rebound in manufacturing after a slump the previous month
  • New Zealand employment increased 1.2%, or by 27,000 jobs, from the 2Q, the most since early 2007
  • Sovereign yields mixed, EU peripheral spreads narrowing. Nikkei +0.8%, Shanghai falls 0.8%. European stocks, U.S. equity-index futures gain. WTI crude, gold, copper higher

Key US events:

US: Fed speaker Pianalto (13:10)
US : MBA mortgage applications, cons n/a (7:00)
US : Leading index, cons 0.6% (19:00)

Asian Headlines

BoJ Minutes for the October meeting said Japan’s economy is recovering moderately and is expected to continue moderate recovery. According to the minutes, members said that consumer prices will likely rise gradually, while a few members said a rise in inflation expectations was moderate and that the pace of export recovery and output lacks strength.

EU & UK Headlines

As part of the ECB stress tests, sovereign debt holdings of Eurozone banks will not be counted toward the final assessment, according to unsourced reports.

German Factory Orders (Sep) M/M 3.3% vs. Exp. 0.5% (Prev. -0.3%)
Eurozone Retail Sales (Sep) M/M -0.6% vs. Exp. -0.4% (Prev. 0.7%, Rev. to 0.5%)
Eurozone Services PMI (Oct F) M/M 51.6 vs. Exp. 50.9 (Prev 52.2)
German Services PMI (Oct F) M/M 52.9 vs. Exp. 52.3 (Prev. 53.7)
French Services PMI (Oct F) M/M 50.9 vs. Exp. 50.2 (Prev. 51.0)
Italian Services PMI (Oct) M/M 50.5 vs. Exp. 51.2 (Prev. 52.7)
Germany sells EUR 3.268bln in 1.00% 2018, b/c 2.3 (Prev. 2.0) and avg. yield 0.71% (Prev. 0.81%), retention 18.3% (Prev. 16.3%)
UK Industrial Production (Sep) M/M 0.9% vs. Exp. 0.6% (Prev. -1.1%)
UK Manufacturing Production (Sep) M/M 1.2% vs. Exp. 1.1% (Prev. -1.2%)
Industrial Output 2.2% (Sep) Y/Y – strongest annual rate since Jan 2011. Industrial Output adds 0.002% to UK Q3 GDP, impact therefore minimal.

US Headlines

Fed’s Williams (Non-Voter, dove) expects growth to accelerate in early-2014 and said that growth is weaker than expected a few months ago. At the conclusion of the QE program, the Fed should announce an end instead of keeping it open-ended, according to Williams.

Equities

Stocks traded higher this morning, as market participants largely disregarded the looming risk event and used the sell off observed yesterday as an opportunity to re-establish longs. Technology and consumer services sectors led the move higher, although the risk on sentiment ensured that all major sectors traded in positive territory.

FX
GBP/USD outperformed its major counterpart EUR/USD yet again, supported by the release of yet another solid UK based macroeconomic
data. Broad based rebound by EUR following yesterday’s aggressive sell-off weighed on the Greenback, with the USD index down 0.27% at
1108GMT. Elsewhere, NZD was supported overnight trade following the release of New Zealand jobs data where the Unemployment Rate
printed at 6.2% as expected but Employment Change beat expectations at 1.2% vs. Exp. 0.5% Q/Q.
Of note, Goldman Sachs said the RBA is just about done, but it still sees a cut, adding that the strength of AUD is pressing the central bank
to cut rates.

Commodities

Iranian foreign minister said believes Iran can reach a framework agreement on nuclear talks this week, but not necessary to do so.

The Eni CEO has said that its Libya terminal is under attack by protestors in an attempt to stop exports, as reported by ANSA.

Furthermore for Libya according to Union, Libya’s Hariga port not open for exporting crude as former petroleum facility guards are not allowing tankers to enter the Haringa port.

US API Crude Oil Inventories (Nov 1) W/W 871k vs. Prev. 5900k
Cushing Crude Inventory (Nov 1) W/W 999k vs. Prev. 2200k
Gasoline Inventories (Nov 1) W/W -4300k vs. Prev. 740k
Distillate Inventory (Nov 1) W/W -2700k vs. Prev. 815k

Chinese metal and
mining companies could be facing a heightened risk of write-downs, according to Barclays’s analysis of earnings reports from the June-September quarter.

SocGen recaps the key macro headlines:

FX volatility stayed bid overnight even as USD gains have been whittled back, but EM currencies continue to struggle as rates from Brazil to South Korea are backing up. Brazil central bank head Tombini sounded a warning to stay vigilant on inflation yesterday and a surprise 3.5 percentage point jump in US ISM non-manufacturing employment added to the corrective price action as UST yields rose above 2.64%, a key technical level. US leading indicators for October are proving that the government shutdown has had a trivial impact on private sector hiring, and consequently, investors are now readjusting underweight USD positions. How far can this run? The repositioning vs a low initial payroll consensus estimate of 120k may have further to go, but much will depend on how much US payrolls surprise on Friday. A 140k gain would not bring Fed tapering any closer and the back up in yield we are seeing would swiftly run out of steam. This makes it tricky to call the next move.

A lot also rides on the ECB meeting tomorrow – simply put, the market will be disappointed if there is no dovish signal. For EUR/USD, the 1.3455 level remains key, and yesterday’s price action shows that bulls will not throw in the towel easily with scattered buying reported by different types of accounts on EUR dips. Currencies displaying a strong correlation with US 10y yields were the biggest losers yesterday. These include the BRL, MXN and ZAR. The 4.7% move in USD/BRL since last week has propelled the pair to close to the pivotal 2.30 level. A break could spell more trouble and a potential return to 2.40 if the push higher in US yields carries on.

EUR/GBP fell to a fresh one-month low of 0.8385 in Asia following on from the sharp retreat yesterday. A surge in the UK services PMI to 62.5 boosted optimism of a further acceleration in Q4 GDP growth to above 1% qoq. The BoE has its homework cut out ahead of the Inflation Report next week. An upward revision to GDP (and inflation?) forecasts is now likely and will keep the debate going over the timing of a first rate hike. On this basis and with a potentially dovish ECB lurking tomorrow, momentum is behind a return of EUR/GBP to the October low of 0.8332.

Final services PMI data from the eurozone are not expected to reveal any shocks this morning. Nor are German new industry orders, but we expect the 2018 bond tap (EUR4bn) to show only moderate demand given the relatively poor value to the curve. Germany has so far achieved 88% of this year’s issuance programme compared to 86% at the same stage last year. In the UK, manufacturing output is forecast to have gained 1.1%, reversing the 1.2% contraction of August. In EM we look for the Polish central bank to keep its benchmark rate on hold at 2.50%.

DB’s Jim Reid concludes the overnight recap:

The prospect of an earlier taper, offset to some extent by later rate hikes, weighed on treasury markets yesterday. 5yr, 7yr and 10yr UST yields added 1bp, 3bp and 5bp respectively. A better than expected US ISM nonmanufacturing report for October added further momentum to the sell-off. The headline print came in at 55.4, which is 1 point higher than the previous months’ reading and beat Bloomberg consensus expectations by 1.4 points. Our economists highlight that the headline was led by a large 3.5 point jump in employment to 56.2 which is the highest reading since August when nonfarm payrolls grew by +193k. DB are projecting a +130k increase in Friday’s October employment report, but the ISM figures impart some mild upside risk to that forecast.

Indeed it was a weak day for most fixed income markets as markets turned bearish on duration. We saw softness across bunds (+7bp), OATs (+7bp) and gilts (+10bp) which accompanied the selloff in EM fixed income. The underperformance of gilts was attributed to another strong UK economic report – this time the service sector PMI – which came in at 62.5 against expectations of 60.0. EURGBP fell 0.8% yesterday and is down more than 2% over the last five days. Credit spreads were pulled wider across cash and indices; but that backdrop didn’t dampen activity in the primary markets though, with over US$14bn of investment grade deals launch yesterday across 21 tranches on Tuesday (Reuters). The S&P500 managed to claw its way back from early lows of -0.7% but a late drop saw the index close weaker (-0.28%) for just the fifth time in 20 trading days.

Looking at today’s calendar, there is a bit of a mid-week lull before we head into the business end of the week (ECB meeting tomorrow and payrolls/Bernanke on Friday). The final PMI services numbers for Europe are due out shortly after we go to print, which will be followed up by  German factory orders for September. A German 5yr bund auction will take place today. In the US, the main data releases are mortgage applications and the leading index. The Cleveland Fed’s Pianalto speaks on housing and the economy towards the end of the US trading day.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/2xpAOpsGPos/story01.htm Tyler Durden

Money Has No Smell for Brits

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Money doesn’t smell of anything except money and wherever it comes from it gives off the same whiff of intoxicating magnetic attraction. Money, where some are concerned, is good wherever you get it from, but the only problem with that is there are times when the policies of some are in complete contradiction with that, but they soon give off some spin to show just how they are doing it the way they should be. Right now, one of those spin artists is the Chancellor of the Exchequer of the UK George Osborne and the British government along with it. Money has no smell for the Brits

UK Beliefs

David Cameron and the British government were one of the first in the EU to speak out about immigration and the dangers of allowing hundreds of thousands of people enter the country in the age-old discussion of the migrant mythological creature that stole our jobs and probably our women and was only here for one thing: money. He also stated that the migrants came for the British Welfare State, which in itself is nothing more than a patriotic belief.

  • The British might believe that they invented the concept of the Welfare State and the Social Security in 1910 with health freely available to all.
  • However, that is in itself not true since it was Chancellor Bismarck of Germany that did so in the 1880s; although the British were perhaps the first to destroy it.
  • Who would actually go to the UK to get treated on the British National Health System?
  • If you go to hospital in the UK, you have 50% more chance of dying because you are going to be badly treated than in any other country in the Western world.
  • You would have to go to emerging countries to find figures like that.
  • The British have 5 times more chance of dying from pneumonia in hospital than in the US and they will have twice the chance of been diagnosed with blood-poisoning.
  • Naturally, the immigrants are flocking to the white cliffs of Dover just to get into a British hospital.
  • There’s one thing being patriotic and then there’s downright proof of pulling the wool over your eyes.
  • The immigrants would go elsewhere if they had the chance of getting better treatment from a welfare state.
  • There are 70, 000 Brits that actually decide to go abroad every year to get treatment in other countries.
  • Immigrants would hardly go to the UK either to claim £55 per week on unemployment benefits when they could get it much better elsewhere (if that were the real reason they were going to a country).

On September 29th 2013 David Cameron gave an interview in the UK where he said that Muslim veils should be banned in schools and in courts and that he would back anyone up that wished to do it.

This is the man that stated that young migrants were not integrating into British culture and that the British had been too soft on agreeing to forego their cherished national identity (as many other nations also did after the financial crisis struck).

Scapegoating is always good for the polls. It takes the blame off the real people who are responsible, doesn’t it and diverts the attention of the public? Spin!

That is despite the fact that ‘national identity’ is a complete myth as no two British people will have the same notion of what identity is and anyway the majority of national identities were entirely constructed after the founding of the nation. They are based on invented stories or people that never existed and that have entered heroic status of the country such as King Arthur or Robin Hood for the UK; simply invented in order to provide origins that are so far off in the past that the British might believe that they were ‘the first’, that they have earned their right to be ‘here’ and that the traits that those people or places might embody (sharing, justice, valor, courage, etc.) should be espoused by the nation. Naturally, all British people are sharing and caring and they all respect justice and are brave souls.

British Contradiction

George Osborne and David Cameron now wish to establish the UK as the biggest Islamic financial center outside of the Islamic world: “the first sovereign to issue an Islamic bond outside the Islamic world” as stated by George Osborne in an interview with the Financial Times. He wishes to issue a $323 million sukuk (a bond that complies with Islamic Sharia law).

George Osborne is under the impression that the UK will be the first to do so outside of the Islamic world, whereas the German federal state of Saxony-Anhalt did so in 2004 (issuing a bond worth $123 million).

Beyond the contradiction of condemning and perhaps even stigmatizing certain parts of the population in the UK and around the world, the British government has no qualms about becoming a financial hub for Islamic finance and banking.

Clearly, money has no smell.

But, it is true that Islamic finance and banking may have something that is very good in today’s bankster world: it is not linked to a tradable commodity and it has no value that is linked to time. Speculation is therefore discouraged, money is always linked to the economy (the real economy and not the virtual one). Prices would be less volatile if we used that sort of finance. Both profits and losses have to be shared by everyone, not just by one party.

  • The British have certainly cottoned on to the fact that Islamic finance is increasing 50% faster than traditional types of banking in the world.
  • Today Islamic banking only represents 1% of transactions that are taking place. But, that looks as if it is set to change.
  • Sharia-compliant assets around the world amount to $1.8 trillion today.
  • That is an increase from $1.3 trillion in 2011.

In other words, the subprime crisis would never have been possible. Sharia-compliant mortgages lend money to people, but the house remains the property of the lender. The buyer pays a rent until the property has been fully bought. There is no interest rate that can go up or down.

It is doubtful whether or not George Osborne is doing it for the good of the British economy or to get around the problems of speculation on the financial markets, or whether he is indeed under the impression that Sharia-compliant finance is better and the way forward. Whatever happens, it seems somewhat of a contradiction to pick n’ mix economic and national policies at will.

Money Has No Smell

It was the Roman Emperor Vespasian that first said that ‘money has no smell’ (pecunia non olet). He had passed a tax on tanners that used urine to cure their hides. He held a coin to his son’s nose asking him if it was offensive. His son replied ‘no’, to which Vespasian replied ‘money has no smell,
and yet it comes from urine
’. The British believe that money has no smell and you can just imagine George Osborne holding that British penny up to Cameron’shooter down at number 10. They are in contradiction of their policies believing immigrants to be (at least publically-speaking) the cause of all ills in the UK, rather than actually dealing with the problem itself of the economy.

They know full-well that it is easier to blame the migrants, since they will never be able to deport them all from the country. They will, therefore, never be able to solve the problem of their economic dilemma. Their predicament will last and their scapegoat will be present to constantly blame. End of story.

The migrants are the problem for the British government apparently, but their money doesn’t smell, does it?

 

Originally posted: Money Has No Smell for Brits

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Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge Bear Rising Wedge High & Tight Flag

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FRJLvl9tW-I/story01.htm Pivotfarm

This is What Happens to Walmart Pork Before It Reaches Your Plate

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

The cruelty inherent in animal factory farming is something that we as a species should find completely and totally unacceptable. Indeed, evidence shows that when people are exposed to the nightmarish conditions faced by factory animals prior to consumption they demand change. This is precisely why corporate interests have pushed ag-gag laws throughout the nation in an attempt to criminalize the exposure of these methods.

I am sure many of you have already been exposed to videos of shocking animal cruelty before. Even if you have, the video below created by Mercy for Animals is a very important watch. It exposes unthinkable abuse of tiny, helpless pigs for absolutely no good reason. These incidents were filmed at Pipestone System’s Rosewood Farms in Pipestone, Minnesota earlier this year.

WARNING: Parts of this video are extraordinarily disturbing. While I think it is important for people to watch it and be aware, it might be too much to handle for some.

 

More from the Huffington Post:

Undercover footage that appears to show horrifying conditions at a Walmart pork supplier has prompted investigations at a Minnesota factory farm.

 

Local law enforcement executed a search warrant at Pipestone System’s Rosewood Farms in Pipestone, Minn., on Oct. 9, following a complaint filed by animal rights nonprofit Mercy for Animals. The organization says an undercover private investigator collected first-hand evidence, including video footage, of inhumane treatment of pigs raised and slaughtered at the facility.

 

The hidden-camera footage appears to show pregnant pigs confined in tiny “gestation crates,” pigs being punched and abused, and piglets being thrown on their heads and mutilated without anesthetic.

 

Matt Rice, the director of investigations at Mercy for Animals, told HuffPost the investigator — whose identity has been kept private — spent 10 weeks posing as an employee at Rosewood Farms earlier this year.

 

“Pregnant pigs are confined in tiny metal crates that are just barely big enough to hold them,” he said of the factory farm. “They’re basically immobile for their entire lives. They can’t turn around, they can’t lie down comfortably, and they suffer from large open wounds and pressure sores from rubbing against the bars.”

 

Rice calls these gestation crates — banned in the European Union and in nine U.S. states, including California, Colorado, Florida and Arizona — “one of the most cruel forms of institutionalized cruelty.”

 

Unlike more than 60 other major retailers, including Kroger, McDonald’s, Safeway,Costco and Kmart, which have all refused to work with pork suppliers that use gestation crates, Walmart has not instituted such a policy.

 

The nonprofit says it has conducted at least two dozen such undercover investigations at factory farms, dairy farms, hatcheries and slaughterhouses in recent years — three of which, including the most recent at Rosewood, were at Walmart pork suppliers.

 

“Every single time, our investigators have brought back images that would horrify most Americans,” Rice said. “This is a sign that mutilating animals without anesthesia and confining them in cages so small they can’t turn around are considered standard industry practice.”

Full article here.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JezFq8vFUEA/story01.htm Tyler Durden

Lakshman Achuthan Confirms "The US Is 'Still' In Recession"

Having described the US as "worse than Japan in the 90s" during his last appearance, ECRI's Lakshman Achuthan remains adamant that (despite Bloomberg TV anchors' insistence that stocks are at all-time highs must mean something) the US has been in recession since last year and remains so. His comments that "you wouldn't have four years of zero-interest rate policy and quantitative easing if everything was okay," are as cogent now as then as he critically explains, as we have noted here and here, that the attention being paid to 'soft data' surveys (such as ISM) is entirely mistaken since ISM/PMIs are now negatively correlated to actual production. The data (hard data doesn't lie) in hand, he notes, suggest downward revisions and well within the range of a mild recession and "the market is disconnected."

 

1:00 ISM/PMI Debunking

1:50 How disconnected the markets are

2:20 The Secular challenge

 

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QalqFPCfB0M/story01.htm Tyler Durden

Lakshman Achuthan Confirms “The US Is ‘Still’ In Recession”

Having described the US as "worse than Japan in the 90s" during his last appearance, ECRI's Lakshman Achuthan remains adamant that (despite Bloomberg TV anchors' insistence that stocks are at all-time highs must mean something) the US has been in recession since last year and remains so. His comments that "you wouldn't have four years of zero-interest rate policy and quantitative easing if everything was okay," are as cogent now as then as he critically explains, as we have noted here and here, that the attention being paid to 'soft data' surveys (such as ISM) is entirely mistaken since ISM/PMIs are now negatively correlated to actual production. The data (hard data doesn't lie) in hand, he notes, suggest downward revisions and well within the range of a mild recession and "the market is disconnected."

 

1:00 ISM/PMI Debunking

1:50 How disconnected the markets are

2:20 The Secular challenge

 

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QalqFPCfB0M/story01.htm Tyler Durden

Mike Maloney's Top 10 Reasons To Buy Gold & Silver

As Mike "Hidden Secrets Of Money" Maloney has said many times before, the economic crisis of 2008 was only a speed bump on the way to the main event.  He believes that before the end of this decade there will be an economic crisis so historic that it will eclipse the crash of 29 and the subsequent great depression.  He also believes it is both unavoidable and inevitable, because it is merely the free market releasing the stored up energy from decades of economic manipulation. As Maolney notes, "the best investment that you will ever make in your lifetime is your own financial education," and the following provides a succinct reminder of the top reasons to buy gold and silver

 

The Top 10 Reasons "I" Buy Gold and Silver

By Mike Maloney,

So here you go… a countdown of “The Top Ten Reasons That I Buy Gold And Silver.”

10. All World’s Currencies are Fiat Currencies, and Fiat Currencies Always Fail.

99.9% of the world’s population is unaware that we no longer use money… we use “fiat” national currencies.  What is a fiat currency?  Fiat currencies are faith based.  They are national currencies that are not backed by anything of value like gold, instead the government just declares that they have value and, as long as the people keep believing, they accept it… for a while.  But here’s the thing, there have been thousands upon thousands of fiat currencies throughout history, and they have all failed… 100%… no exceptions.

But there is a vast difference this time around.  Since 1971, for the very first time in history, all of the world’s currencies are fiat currencies simultaneously. 

Remember this as we progress through the Top Ten… 

ALL FIAT CURRENCIES FAIL.

9. The Current State of the Global Economy.

In my book, Guide to Investing in Gold and Silver, and in Hidden Secrets of Money, I show how societies have swung back and forth from quality money to quantity currency.  Originally, quantity currency took the form of debased coinage (gold or silver money that has been diluted by adding cheap and abundant base metals such as copper).  Then it took the deceptive form of national currencies that were initially backed by money, IE: claim checks on gold and/or silver. Once these were established, governments then could change the laws, basically making fraud legal, so they could print claim checks on gold that didn’t exist.  The next step was to sever the connection between money and currencies entirely.  

Back when we used real money gold would automatically balance all economies.  When one country experienced an economic boom they would import cheap goods from countries with depressed economies and lower wage rates.  The outflows of gold from the boom country would cause a deflation, cooling the economy, while the countries experiencing gold inflows would boom, causing their labor rates to increase, which in turn would cause the prices of their goods to rise.  This meant that trade imbalances would always automatically rebalance.  Government spending was also constrained.  If a government wanted to spend more than its income (deficit spending) it had to borrow gold from the private sector.  If the government borrowed too much it would cause interest rates to rise, which in turn would slow the economy, which in turn would cause tax revenues to fall, which meant less income for the government, which in turn would cause the government to cut spending.

But the debt based global monetary system has allowed deficit spending, trade imbalances, and bubbles to persist and balloon to levels unprecedented in all of history.  We are in completely uncharted territory.  The credit/debt bubble and the derivatives bubble threaten to take down the world economy.  The only comparison you could make is to take every great bubble in history times one million and have it burst everywhere on the planet simultaneously… It threatens to be a global financial nuclear holocaust the only financial survivors of which will be the owners of gold and silver.

8. Currency Crisis / New World Monetary System.

I am a firm believer that everything happens in waves and cycles.  So when I started writing my book back in 2005 I entered every financial crisis that I could identify into a spreadsheet, starting from the beginning of the USA, looking for a cycle, and something very dramatic stuck out at me.  I had discovered that every 30-40 years the world has an entirely new monetary system.

From that day till now I have been telling as many people as I could that before the end of this decade (before 2020) there will be an emergency meeting of the G-20 finance ministers (or something like that) to hash out a new world monetary system.  It’s normal.  No man made monetary system can possibly account for all of the forces in the free market.  They get old… they develop stress cracks… then they implode.  

We have had four different monetary systems in the past 100-years.  The system we are on today is the U.S. dollar standard.  It is an ageing system that is way overdue for its own demise.  It is now developing stress cracks, and will one day implode.  Like I said, it’s normal.  

But what is different this time around is that the last three transitions were baby-steps from full gold backing, to partial gold backing, to less gold backing, to no gold backing.  In each of these transitions the system we were transitioning from had a component that could never fail… gold.  This time we will be transitioning from a system based on something that always fails… fiat currencies.  The key component to this transition from the U.S. dollar standard to some new standard is of course the U.S. dollar.  By the time the emergency meeting takes place the U.S. dollar will be in the final stages of the terminal condition known as fiat failure.   

But the U.S. dollar represents more than half of the value of all the world’s currency.  A dollar crisis would cast doubts on all fiat currencies, and the cascading effect of loss of faith could cause the rest of them to fall like dominos.  The central bankers will try everything they can think of to keep the fiat game going, but when everything they try fails they’ll look around and say, “What worked before.”  And once again the pendulum will swing back to quality money. 

The only beneficiaries of this event will be gold and silver, and those who own them.

7. Gold and Silver Come with a Central Bank Guarantee.

My book was written from 2005 through 2007.  In it I said there would first be the threat of deflation (this came true in the crisis of 2008) to which Ben Bernanke would overreact with a helicopter drop (this came true with the bailouts and QEs) which
would cause an inflation (this came true when the stock markets and real estate reflated.)   Next there will be a real deflation… a contraction of the currency supply.  This will happen when the credit/debt/bond/fiat currency bubble and the derivatives bubble begin to implode.  The reaction of the world’s central banks will be to print until deflation gives way.  I believe this will cause a hyperinflation.  A hyperinflation doesn’t require a nation to print its currency into oblivion… it only requires a loss of faith.

But never fear, because, periodically, throughout history, gold has revalued itself as it is bid up in price by the free market as people rush back to it for safety.  This is when gold does an accounting of all of the currency that had been created since the last time gold revalued itself.  In doing so its purchasing power rises exponentially.

It’s always done this… and I believe it always will.

6. Everything Else is a Scary Investment.

By any realistic measure stocks have been in a super-bubble for more than a decade now with valuations and yields in the danger zone, while bonds are in the later stages of a 30-year bull market and real estate is still deflating from the biggest bubble in history. 

Dr. Robert Shiller, of Yale University, has compiled data on the stock market going all the way back to the year 1880.  His research concludes that by one measure the stock market has been in a bubble since 1998 and by his other measure the bubble is far bigger and more extreme than any prior bubble, including the stock market bubble of the Roaring `20s that led to the crash of `29.  Further research shows that the only reason the markets have been levitated to these levels is due to Federal Reserve stimulus.  What will happen if they take away the training wheels? I wouldn’t want to be invested in stocks when it finally implodes.

U.S. Treasury bonds have been a great investment for more than 30-years, but no bull market lasts forever.  In fact, for the 37 years after WII, bonds were such a bad investment that by the end of the `70s they had earned the nickname “certificates of confiscation”, because they confiscated your wealth.  But that was back when countries were financially responsible.  Now most countries on the planet run their finances like Greece, and the United States of America is leading the way.  And as the world’s central banks keep interest rates low it has caused bond investors to take extraordinary risks in search of a reasonable return.  We are now in a global bond bubble, and I believe that this has made the bond market one of the most dangerous places to invest right now.

When the stock market crashed in 2000 it caused a recession in 2001.  Alan Greenspan’s response was to cut interest rates dramatically.  Then along came 9/11, making the stock market crash even worse, and his response was to take the Federal Funds Rate to lows for a duration last seen in the Great Depression.  Greenspan’s goal was to reflate the stock market… his achievement was to accidentally create the greatest real estate bubble in history.

Since the popping of the bubble in 2007 real estate values have come back down to fair value and then bounced back into a small bubble. Dr. Shiller, also the creator of the Case-Shiller Home Price Index, agrees.  This is typical price action of any super-bubble that’s in the process of popping… it’s called a “dead cat bounce.”  The public always chases yesterday’s news.  As prices reverted near fair value, investors rushed in to scoop up deals causing prices to rise once again.  But then, just as in the crash of `29 and the NASDAQ crash of 2000, the dead cat bounce will roll over and the crash will continue until the opposite extreme of severe undervaluation is reached.  This is natural and is what is required to clear out the excesses left over from the bubble days.  Too many jobs were created in that sector and too many homes were built.  Undervaluation is required to clear out the excess inventory and cause workers to move on.

But what worries Dr. Shiller is that institutional investment firms have bought up as much as 30% of the homes that were foreclosed on since the crash of 2008.  This has the potential of making real estate as volatile as the stock market.  If these firms ever decide to sell they can dump thousands of homes all at once, causing the 2008 real estate crash to look like the calm before the storm.

Personally… the thought of investing in real estate right now is down right scary.

So the stock market, bonds, and real estate are either in a bubble or have been in a bubble in the last decade.  Gold and silver, however, haven’t been in a bubble for more than 30-years, and from my measurements still appear to be less than half way through their bull market.    

The next great bubble will someday be in gold and silver… It‘s just their turn.

5. Market Psychology.

I’ve often said that the markets and the economy are both psychological and cycle-logical.  Nobody can really understand the markets or the economy, but you can get an inkling of what they’re about if you understand what drives them… greed and fear.  And the most entertaining part of monetary history is the study of their byproducts; manias, panics, bubbles, and crashes.  When you study these you quickly learn the meaning of the old saying “The bull climbs the stairs, but the bear jumps out the window.”  What it means is that it can take years to create a bubble, but only days or weeks for it to burst. This is because, when it comes to greed and fear… fear is by far the more powerful emotion.

Gold and silver are sometimes the exceptions to this rule because they can rise as fast as lightning in a panic.  In the golden bull market of the 70s, it took nine years for gold to rise from $35 to $400, but once a panic out of dollars to the safe haven of gold began to develop, it took only 33 trading days to more than double, rocketing to $850.

But actually, it was only a very small percentage of the population that was panicking out of dollars in the 70s.  This time I think it will be everyone.   Where do you think gold and silver will be headed if my reasons ten through six come to pass?

4. This Time it Really is Different.

The first time I submitted my book, Guide to Investing in Gold and Silver, to the publisher it was rejected.  I had overwritten the book.  It was 800 pages long.  I was provided with two editors and over a six-month period 600 pages were cut, including nine entire chapters.  One of the deleted chapters contained what is probably the most important factor in trying to determine where gold and silver prices may be headed in the future.  It was the chapter on the differences between the precious metals bull market of the 1970s and the great gold and silver rush of today.  Since then I have traveled the world showing people just how dramatic the differences are, and that… “This time it really is different.”

In the 1970s the number of investors in state run economies like Mao’s China or the U.S.S.R. was zero, and most of the rest of the world lived in extreme poverty. The price of gold was set by two major exchanges, the London Bullion Market Association (LBMA) and th
e Commodities Exchange (COMEX) in the U.S. so only north America and western Europe, about 10% of the world’s population, could participate in the rush that drove gold up 24 times in price from $35 to $850. This time it’s everyone.

Every country on the planet has expanded their currency supplies about 10-fold since the `70s, so each potential investor has 10-times the currency. And within each population there has been the extraordinary development of the investor mindset.  In the 70s we were a planet of savers, but then, as nations around the world abandoned gold and silver as money and adopted fiat currency, inflation raged punishing savers and rewarding investors and speculators.  Then we had the tech bubble of the `90s and everyone became a stock investor or trader. Then we had the global real estate bubbles and everyone became a real estate investor or flipper.  For more than 30-years saving has been punished and investing and speculating has been rewarded.  The result is that there are many, many times more people that are likely to invest in gold and silver this time around.  The number is very hard to project, but I would guess it’s somewhere between 10 and 100… possibly even as much as 1,000 times more people with an investor mindset.  Remember that in the state run economies (more than half the world’s population) there were no investors, and today China is in the midst of an investor driven real estate hyper-bubble.

So that’s 10-times the people, each with 10-times the currency, and somewhere between 10 and 1,000-times the number of people with an investor mindset.   That is somewhere between 1,000 and 100,000 times more currency that will someday come chasing gold and silver this time around.

This time… it really is different.

3. They Should Buy a Whole Lot More Than They Do.

Many analysts in the precious metals community claim that gold is the ultimate wealth insurance because it maintains its purchasing power throughout the centuries.  There is an old myth they propagate that in ancient Rome an ounce of gold could clothe a man from head to toe with a toga, sandals, and a belt, and that today a man can still clothe himself in a suit, shoes, and a belt for the price of an ounce of gold.  They claim that this has always been the case.  Nothing could be further from the truth.  Before the Federal Reserve was created in 1913 you could buy a man’s suit, shoes, and belt for an ounce of gold, and gold’s price was $20.67 per ounce, but due to inflation, by the end of the roaring `20s you couldn’t.  At the beginning of the great depression gold was still $20.67, but because of deflation you could once again buy the outfit. Then in 1934, as the dollar was devalued, gold’s price rose to $35 and you could now buy an exquisite outfit, but by 1970, with gold still at $35 per ounce, it would only buy the shoes, but just ten years later, when it hit $850, it would buy a topnotch suit, very fine shoes, and a great belt.  Then by the year 2001, when gold bottomed at $252, it could only buy a shoddy suit, cheap shoes, and a crummy belt.  

Yes gold is always worth something, but it has always varied in a range of purchasing power.  This myth that gold maintains the same purchasing power throughout the centuries is based on the true fact that we mine gold at about the same rate as the growth of the population so there is relatively the same amount of gold per person on the planet today as there was in ancient Rome. So let’s dissect the myth of the Roman suit and see why gold’s purchasing power has varied, and what it could be in the future.

The gains in efficiencies made since ancient Rome are mind boggling.  To make a toga required either cotton to be hand planted, hand tended, hand picked and hand separated from the seed, or it required sheepherders to tend small flocks of sheep and then shear them by hand.  Then the cotton or wool had to be hand washed, hand combed, and hand spun into thread, but the spinning wheel was yet to be invented, so a spindle and distaff (basically two sticks) were used instead.  This was a very laborious process so it could take someone weeks to make enough thread for a toga.  Then the thread was hand dyed with hand made colors that had been hand mined or harvested.  Then it had to be hand woven on a two person vertical loom (again, slow and laborious.)  Then the cloth was cut to a pattern and hand stitched into a toga.  The shoes and belt were equally labor intensive.

Today, with factory farming, cheap fuel, modern irrigation, and pesticides it’s possible to tend thousands of acres planted at densities never before imagined.  Giant combines drive through the field plowing the dirt and sowing the seeds in one pass.  At harvest time specialized combines pick the cotton and other machined separate the seed.  With factory ranching efficiency is the same story with thousands of sheep being tended and shorn in production line fashion. Then trucks deliver the cotton or wool to where it’s washed, combed, and spun into miles of thread in minutes, then dyed with cheap mass production dyes and woven into miles of cloth by machines… again in minutes.  Then the cloth is stacked many layers thick and a computer guided shear cuts out dozens of each of the parts of the suit in a single pass.  The parts go to an assembly plant where workers, who specialize in making the left sleeve, or right leg and such, do so at amazing speed.  Workers that can turn out dozens of suits per day do the final assembly, also at a blazing rate.  Then it’s shipped to a store where you can pick from dozens, or even hundreds of styles, colors, and sizes.  It’s a similar story at the shoe factory that spits out a pair of shoes every few seconds, and the belts that come off the production line by the thousands.

The end result is that the “time value” of the Roman outfit most likely measures in months of human labor, whereas the modern suit contains only a few hours of human time.  This is true of all the other stuff in society as well.  When it comes to the time value contained in stuff… everything today is on sale for a tiny, minuscule fraction of what it once cost.  And as proof to support my thesis I offer this… Today a good percentage of the world’s population has maybe a hundred times more stuff than 99% had 2,000 years ago.  Think about it.  You are surrounded with furniture, cell phones, computers, TVs, refrigerators, grocery stores, cars, planes, hotels, restaurants, a great bed to sleep in at night, and just about anything else that you want.  By contrast 2,000 years ago most people, with the exception of the ruling class, lived a subsistence living barely able to afford the things they needed to survive.  In many cases a great bed or pair of shoes were extravagances they would not experience in their lifetimes.

So if this is true… and it is… then why is gold’s purchasing power so low?  If there’s so much more stuff per person, but the same amount of gold per person… shouldn’t an ounce of gold buy many, many, many times more stuff than it does today?  Absolutely, emphatically, YES… it should.

Then why doesn’t it?

Because of the other big factor in busting this myth… 

In ancient Rome, if you wanted to save some of your wealth for the future there was only one asset available for you to save your purchasing power in… real money… the gold and silver coins that made up their money supply.  Today if you want to save some of your wealth for the future you do so with financial assets such as stocks and/or bonds, and maybe a tiny
portion of currency in a checking account.  These highly liquid assets actually compete with gold and silver as a place to store your wealth.  They all dilute each other’s purchasing power.  

So that’s the answer… competing fiat currencies and other financial assets.  In ancient Rome there was only one place to store your wealth… today there are thousands.  The gains in purchasing power that gold should have made due to man becoming so much more efficient at making stuff, have been almost exactly offset by alternative liquid financial assets in which to store that wealth. 

Highly liquid world financial assets (which exclude all real estate, any business not listed on an exchange, and derivatives) total about $230 trillion.  Total world currency, including bank deposits, stands at about $50 trillion.  So that’s a grand total of $280 trillion of liquid assets.  That’s $40,000 worth of wealth per person on the planet stored as transient digits in computers.

Today, investment grade gold (coins and bars) held by the public totals about 1.1 billion ounces and there are about 7.1 billion people on the planet.  That’s 0.15 ounces of gold per person.  At today’s prices it’s about $200 worth of gold per person.  If you include official reserves, such as central bank gold, you get about $400, and if you include all above ground gold, including things like jewelry and religious artifacts… in other words, all the gold ever mined in history, you get about $800 worth of gold per person.  That’s it… That’s all.

With technology, machinery, and super cheap energy we’ve become a thousand times more efficient at producing stuff, and at the same time we’ve created a thousand more ways to store our wealth.  If it weren’t for all those competing currencies and alternative financial assets gold would buy many, many times more stuff.  But even with all this competition, because of the gains in efficiency, an ounce of gold should buy 10 men’s suits today.  And if fiat currencies were to fail (like they always have) then it should buy a hundred or a thousand.

So what happens to those alternate financial assets in the inevitable market crash that lies out there in the future?  Those trusted financial assets suddenly become, hocus-pocus, voodoo, financial assets and their value evaporates, just like those AAA rated Mortgage Backed Securities did in the crash of 2008.  What happens to fiat currencies in the coming currency crisis?  All those currencies become hot potatoes that nobody wants, causing hard assets, like gold and silver, to be bid up to the moon.  Either way, gold will buy a whole lot more stuff someday in the near future.

So you have $40,000 worth of wealth per person stored in alternative liquid assets compared to just $200 per person stored in investment grade gold.  That’s a 200-1 ratio.  That means that in a crisis if just 10% of the wealth invested in those alternative assets were to come chasing gold, its price could rise 20-fold.

The moral of the story is… If you want to buy 20 suits, shoes, and belts a few years from now… buy an ounce of gold today.

2. Add Up Reasons 10-3… It’s All Happening At Once, and It’s Global.

Since 1971 all of the world’s currencies are fiat currencies simultaneously… and all fiat currencies in history have failed. 

The world’s central banks are simultaneously creating fiat currency on a suicidal scale never before imagined. 

Every 30-40 years the world has an entirely new monetary system, but for the first time we will be transitioning from a system based on something that always fails… fiat currencies.  So unlike previous transitions, this transition will be felt by everyone on the planet.

This time there is 10-times the people that can buy gold, each with 10-times the currency, and somewhere between 10 and 1,000-times the number of people with an investor mindset.   That is somewhere between 1,000 and 100,000 times more currency that will someday come chasing gold and silver this time around.

Periodically, throughout history, gold accounts for all of the currency that was created since the last time gold did the accounting.  This time it has to account for a mountain of currency the scale of which has never been seen before. 

We are in completely uncharted territory.  

Real estate, stocks, and bonds are all in bubbles.

The credit/debt and derivatives bubbles threaten the world economy.  

It takes years to create a bubble, but only days or weeks for it to burst… and all bubbles eventually burst. 

In market crashes and currency crisis, trusted investments can sometimes evaporate.

In currency crisis, a stock market crash, or in the final stages of a gold bull market, fear is what drives investors.

When it comes to greed and fear, fear is by far the more powerful emotion.

Gold and silver haven’t been in a bubble for more than 30-years, so the next great bubble will be in gold and silver… It‘s just their turn.

There’s more stuff per person than at any time in history but the same amount of gold.

Competing fiat currencies and alternate financial assets have diluted gold and silver’s purchasing power.  

There is 200 times more wealth invested in liquid assets other than gold.

If 10% of that wealth came chasing gold, its price could rise 20-fold.

And that’s 10%.  In the crisis I see coming, fear should drive a lot more than just 10% of the world’s liquid wealth towards gold and silver.

Knowing this you would think I would take every spare unit of currency I can get my hands on and buy gold.  So why don’t I?  Because silver is undervalued compared to gold.  So I take every spare unit of currency I can get my hands on and buy lots of silver and a little gold.

1. I Sleep Better.

As I said at the beginning of this article, I believe that an economic crisis of historic proportions is headed straight at us, and there is no avoiding it.  Never before have all governments on the planet simultaneously laid down the foundation for the perfect economic storm.  I believe that there will be a global fiat currency crisis that will cause the bubbles in stocks, bonds, and real estate to burst simultaneously.  This will result in the greatest economic crash the world has ever seen.

Things could get pretty bad.  The possibilities range from my being completely wrong and things going pretty much like they are, to a total economic collapse and financial Armageddon from which we never recover.  Toward the bad end is the possibility of the failure of the monetary system, which would raise the likelihood of social unrest (rioting), and disruption of the food supply.

But in any range of possibilities there is something called a bell curve of probabilities.  What that means is that either of the extremes (also called the tail risks) are very unlikely to happen, but that something in the middle is very likely to happen. 

Believe it or not, I am not a doomsayer, but nor do I believe the government when they tell me everything is going to be all right.  

I think it’s going to be something in the middle.  Yes, I believe it’s going to be the greatest crash in history, but I have great hope.  Man is an amazing species.  We have a resilience and ability to adapt and bounce back from anything.  

How have I prepared for the range of possibilities?  I have been accumulating precious metals since 2002.  To me this relieves a lot of anxiety.  And now I have purchased a small supply of emergency food. I found an assortment that will have me eating like a king in an emergency situation.  I have given one of these assortments to each of my family members, my best friends, and all of my employees.  This has relieved any remaining anxieties.

Yes, the stock and real estate markets will probably crash, and for those who are unprepared it will be devastating.  But if it’s going to happen anyway, and if there is nothing I can do about it, then I may as well try to figure out how to turn this catastrophe into the best thing that has ever happened to me.  When I talk about an economic crash, most people get a picture in their head’s of the devastated, bombed-out wastelands left over after a war.  It’s not going to be that way.  All the true wealth, the buildings, the real estate, and the factories will still be there… they’ll just be on sale.  

It is when stocks and real estate are bottoming that I intend to sell my gold and silver and buy up as much true wealth as I can.  

Yes, banks could fail, but new, more efficient ones will take their place.  Yes, the world monetary system could collapse, but this could be a good thing.  If we could make fraud, theft, and conflicts of interest illegal for the banking sector and monetary system, and if we just leave the free market alone and stop manipulating and meddling with it, it would quickly provide us with a new, efficient, stable, and honest monetary system that would increase the prosperity and standard of living for us all.

As I have said many times… there are these brief moments in history where the safest asset class, gold and silver, the safe haven to protect your wealth for the last 5,000 years, simultaneously become the asset class with the greatest potential gains in absolute purchasing power.  I believe we are in one of these episodes right now, and the performance of gold and silver over the last twelve years have proven me correct.

In periods of crisis gold and silver are the asset class that out performs all others.  This decade will see the greatest financial crisis in history.  That means it will also be the greatest wealth transfer in history.  And that means that it is the greatest opportunity in history.

How do I sleep at night?

Very well thank you.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zPQMth_Sne8/story01.htm Tyler Durden

Mike Maloney’s Top 10 Reasons To Buy Gold & Silver

As Mike "Hidden Secrets Of Money" Maloney has said many times before, the economic crisis of 2008 was only a speed bump on the way to the main event.  He believes that before the end of this decade there will be an economic crisis so historic that it will eclipse the crash of 29 and the subsequent great depression.  He also believes it is both unavoidable and inevitable, because it is merely the free market releasing the stored up energy from decades of economic manipulation. As Maolney notes, "the best investment that you will ever make in your lifetime is your own financial education," and the following provides a succinct reminder of the top reasons to buy gold and silver

 

The Top 10 Reasons "I" Buy Gold and Silver

By Mike Maloney,

So here you go… a countdown of “The Top Ten Reasons That I Buy Gold And Silver.”

10. All World’s Currencies are Fiat Currencies, and Fiat Currencies Always Fail.

99.9% of the world’s population is unaware that we no longer use money… we use “fiat” national currencies.  What is a fiat currency?  Fiat currencies are faith based.  They are national currencies that are not backed by anything of value like gold, instead the government just declares that they have value and, as long as the people keep believing, they accept it… for a while.  But here’s the thing, there have been thousands upon thousands of fiat currencies throughout history, and they have all failed… 100%… no exceptions.

But there is a vast difference this time around.  Since 1971, for the very first time in history, all of the world’s currencies are fiat currencies simultaneously. 

Remember this as we progress through the Top Ten… 

ALL FIAT CURRENCIES FAIL.

9. The Current State of the Global Economy.

In my book, Guide to Investing in Gold and Silver, and in Hidden Secrets of Money, I show how societies have swung back and forth from quality money to quantity currency.  Originally, quantity currency took the form of debased coinage (gold or silver money that has been diluted by adding cheap and abundant base metals such as copper).  Then it took the deceptive form of national currencies that were initially backed by money, IE: claim checks on gold and/or silver. Once these were established, governments then could change the laws, basically making fraud legal, so they could print claim checks on gold that didn’t exist.  The next step was to sever the connection between money and currencies entirely.  

Back when we used real money gold would automatically balance all economies.  When one country experienced an economic boom they would import cheap goods from countries with depressed economies and lower wage rates.  The outflows of gold from the boom country would cause a deflation, cooling the economy, while the countries experiencing gold inflows would boom, causing their labor rates to increase, which in turn would cause the prices of their goods to rise.  This meant that trade imbalances would always automatically rebalance.  Government spending was also constrained.  If a government wanted to spend more than its income (deficit spending) it had to borrow gold from the private sector.  If the government borrowed too much it would cause interest rates to rise, which in turn would slow the economy, which in turn would cause tax revenues to fall, which meant less income for the government, which in turn would cause the government to cut spending.

But the debt based global monetary system has allowed deficit spending, trade imbalances, and bubbles to persist and balloon to levels unprecedented in all of history.  We are in completely uncharted territory.  The credit/debt bubble and the derivatives bubble threaten to take down the world economy.  The only comparison you could make is to take every great bubble in history times one million and have it burst everywhere on the planet simultaneously… It threatens to be a global financial nuclear holocaust the only financial survivors of which will be the owners of gold and silver.

8. Currency Crisis / New World Monetary System.

I am a firm believer that everything happens in waves and cycles.  So when I started writing my book back in 2005 I entered every financial crisis that I could identify into a spreadsheet, starting from the beginning of the USA, looking for a cycle, and something very dramatic stuck out at me.  I had discovered that every 30-40 years the world has an entirely new monetary system.

From that day till now I have been telling as many people as I could that before the end of this decade (before 2020) there will be an emergency meeting of the G-20 finance ministers (or something like that) to hash out a new world monetary system.  It’s normal.  No man made monetary system can possibly account for all of the forces in the free market.  They get old… they develop stress cracks… then they implode.  

We have had four different monetary systems in the past 100-years.  The system we are on today is the U.S. dollar standard.  It is an ageing system that is way overdue for its own demise.  It is now developing stress cracks, and will one day implode.  Like I said, it’s normal.  

But what is different this time around is that the last three transitions were baby-steps from full gold backing, to partial gold backing, to less gold backing, to no gold backing.  In each of these transitions the system we were transitioning from had a component that could never fail… gold.  This time we will be transitioning from a system based on something that always fails… fiat currencies.  The key component to this transition from the U.S. dollar standard to some new standard is of course the U.S. dollar.  By the time the emergency meeting takes place the U.S. dollar will be in the final stages of the terminal condition known as fiat failure.   

But the U.S. dollar represents more than half of the value of all the world’s currency.  A dollar crisis would cast doubts on all fiat currencies, and the cascading effect of loss of faith could cause the rest of them to fall like dominos.  The central bankers will try everything they can think of to keep the fiat game going, but when everything they try fails they’ll look around and say, “What worked before.”  And once again the pendulum will swing back to quality money. 

The only beneficiaries of this event will be gold and silver, and those who own them.

7. Gold and Silver Come with a Central Bank Guarantee.

My book was written from 2005 through 2007.  In it I said there would first be the threat of deflation (this came true in the crisis of 2008) to which Ben Bernanke would overreact with a helicopter drop (this came true with the bailouts and QEs) which would cause an inflation (this came true when the stock markets and real estate reflated.)   Next there will be a real deflation… a contraction of the currency supply.  This will happen when the credit/debt/bond/fiat currency bubble and the derivatives bubble begin to implode.  The reaction of the world’s central banks will be to print until deflation gives way.  I believe this will cause a hyperinflation.  A hyperinflation doesn’t require a nation to print its currency into oblivion… it only requires a loss of faith.

But never fear, because, periodically, throughout history, gold has revalued itself as it is bid up in price by the free market as people rush back to it for safety.  This is when gold does an accounting of all of the currency that had been created since the last time gold revalued itself.  In doing so its purchasing power rises exponentially.

It’s always done this… and I believe it always will.

6. Everything Else is a Scary Investment.

By any realistic measure stocks have been in a super-bubble for more than a decade now with valuations and yields in the danger zone, while bonds are in the later stages of a 30-year bull market and real estate is still deflating from the biggest bubble in history. 

Dr. Robert Shiller, of Yale University, has compiled data on the stock market going all the way back to the year 1880.  His research concludes that by one measure the stock market has been in a bubble since 1998 and by his other measure the bubble is far bigger and more extreme than any prior bubble, including the stock market bubble of the Roaring `20s that led to the crash of `29.  Further research shows that the only reason the markets have been levitated to these levels is due to Federal Reserve stimulus.  What will happen if they take away the training wheels? I wouldn’t want to be invested in stocks when it finally implodes.

U.S. Treasury bonds have been a great investment for more than 30-years, but no bull market lasts forever.  In fact, for the 37 years after WII, bonds were such a bad investment that by the end of the `70s they had earned the nickname “certificates of confiscation”, because they confiscated your wealth.  But that was back when countries were financially responsible.  Now most countries on the planet run their finances like Greece, and the United States of America is leading the way.  And as the world’s central banks keep interest rates low it has caused bond investors to take extraordinary risks in search of a reasonable return.  We are now in a global bond bubble, and I believe that this has made the bond market one of the most dangerous places to invest right now.

When the stock market crashed in 2000 it caused a recession in 2001.  Alan Greenspan’s response was to cut interest rates dramatically.  Then along came 9/11, making the stock market crash even worse, and his response was to take the Federal Funds Rate to lows for a duration last seen in the Great Depression.  Greenspan’s goal was to reflate the stock market… his achievement was to accidentally create the greatest real estate bubble in history.

Since the popping of the bubble in 2007 real estate values have come back down to fair value and then bounced back into a small bubble. Dr. Shiller, also the creator of the Case-Shiller Home Price Index, agrees.  This is typical price action of any super-bubble that’s in the process of popping… it’s called a “dead cat bounce.”  The public always chases yesterday’s news.  As prices reverted near fair value, investors rushed in to scoop up deals causing prices to rise once again.  But then, just as in the crash of `29 and the NASDAQ crash of 2000, the dead cat bounce will roll over and the crash will continue until the opposite extreme of severe undervaluation is reached.  This is natural and is what is required to clear out the excesses left over from the bubble days.  Too many jobs were created in that sector and too many homes were built.  Undervaluation is required to clear out the excess inventory and cause workers to move on.

But what worries Dr. Shiller is that institutional investment firms have bought up as much as 30% of the homes that were foreclosed on since the crash of 2008.  This has the potential of making real estate as volatile as the stock market.  If these firms ever decide to sell they can dump thousands of homes all at once, causing the 2008 real estate crash to look like the calm before the storm.

Personally… the thought of investing in real estate right now is down right scary.

So the stock market, bonds, and real estate are either in a bubble or have been in a bubble in the last decade.  Gold and silver, however, haven’t been in a bubble for more than 30-years, and from my measurements still appear to be less than half way through their bull market.    

The next great bubble will someday be in gold and silver… It‘s just their turn.

5. Market Psychology.

I’ve often said that the markets and the economy are both psychological and cycle-logical.  Nobody can really understand the markets or the economy, but you can get an inkling of what they’re about if you understand what drives them… greed and fear.  And the most entertaining part of monetary history is the study of their byproducts; manias, panics, bubbles, and crashes.  When you study these you quickly learn the meaning of the old saying “The bull climbs the stairs, but the bear jumps out the window.”  What it means is that it can take years to create a bubble, but only days or weeks for it to burst. This is because, when it comes to greed and fear… fear is by far the more powerful emotion.

Gold and silver are sometimes the exceptions to this rule because they can rise as fast as lightning in a panic.  In the golden bull market of the 70s, it took nine years for gold to rise from $35 to $400, but once a panic out of dollars to the safe haven of gold began to develop, it took only 33 trading days to more than double, rocketing to $850.

But actually, it was only a very small percentage of the population that was panicking out of dollars in the 70s.  This time I think it will be everyone.   Where do you think gold and silver will be headed if my reasons ten through six come to pass?

4. This Time it Really is Different.

The first time I submitted my book, Guide to Investing in Gold and Silver, to the publisher it was rejected.  I had overwritten the book.  It was 800 pages long.  I was provided with two editors and over a six-month period 600 pages were cut, including nine entire chapters.  One of the deleted chapters contained what is probably the most important factor in trying to determine where gold and silver prices may be headed in the future.  It was the chapter on the differences between the precious metals bull market of the 1970s and the great gold and silver rush of today.  Since then I have traveled the world showing people just how dramatic the differences are, and that… “This time it really is different.”

In the 1970s the number of investors in state run economies like Mao’s China or the U.S.S.R. was zero, and most of the rest of the world lived in extreme poverty. The price of gold was set by two major exchanges, the London Bullion Market Association (LBMA) and the Commodities Exchange (COMEX) in the U.S. so only north America and western Europe, about 10% of the world’s population, could participate in the rush that drove gold up 24 times in price from $35 to $850. This time it’s everyone.

Every country on the planet has expanded their currency supplies about 10-fold since the `70s, so each potential investor has 10-times the currency. And within each population there has been the extraordinary development of the investor mindset.  In the 70s we were a planet of savers, but then, as nations around the world abandoned gold and silver as money and adopted fiat currency, inflation raged punishing savers and rewarding investors and speculators.  Then we had the tech bubble of the `90s and everyone became a stock investor or trader. Then we had the global real estate bubbles and everyone became a real estate investor or flipper.  For more than 30-years saving has been punished and investing and speculating has been rewarded.  The result is that there are many, many times more people that are likely to invest in gold and silver this time around.  The number is very hard to project, but I would guess it’s somewhere between 10 and 100… possibly even as much as 1,000 times more people with an investor mindset.  Remember that in the state run economies (more than half the world’s population) there were no investors, and today China is in the midst of an investor driven real estate hyper-bubble.

So that’s 10-times the people, each with 10-times the currency, and somewhere between 10 and 1,000-times the number of people with an investor mindset.   That is somewhere between 1,000 and 100,000 times more currency that will someday come chasing gold and silver this time around.

This time… it really is different.

3. They Should Buy a Whole Lot More Than They Do.

Many analysts in the precious metals community claim that gold is the ultimate wealth insurance because it maintains its purchasing power throughout the centuries.  There is an old myth they propagate that in ancient Rome an ounce of gold could clothe a man from head to toe with a toga, sandals, and a belt, and that today a man can still clothe himself in a suit, shoes, and a belt for the price of an ounce of gold.  They claim that this has always been the case.  Nothing could be further from the truth.  Before the Federal Reserve was created in 1913 you could buy a man’s suit, shoes, and belt for an ounce of gold, and gold’s price was $20.67 per ounce, but due to inflation, by the end of the roaring `20s you couldn’t.  At the beginning of the great depression gold was still $20.67, but because of deflation you could once again buy the outfit. Then in 1934, as the dollar was devalued, gold’s price rose to $35 and you could now buy an exquisite outfit, but by 1970, with gold still at $35 per ounce, it would only buy the shoes, but just ten years later, when it hit $850, it would buy a topnotch suit, very fine shoes, and a great belt.  Then by the year 2001, when gold bottomed at $252, it could only buy a shoddy suit, cheap shoes, and a crummy belt.  

Yes gold is always worth something, but it has always varied in a range of purchasing power.  This myth that gold maintains the same purchasing power throughout the centuries is based on the true fact that we mine gold at about the same rate as the growth of the population so there is relatively the same amount of gold per person on the planet today as there was in ancient Rome. So let’s dissect the myth of the Roman suit and see why gold’s purchasing power has varied, and what it could be in the future.

The gains in efficiencies made since ancient Rome are mind boggling.  To make a toga required either cotton to be hand planted, hand tended, hand picked and hand separated from the seed, or it required sheepherders to tend small flocks of sheep and then shear them by hand.  Then the cotton or wool had to be hand washed, hand combed, and hand spun into thread, but the spinning wheel was yet to be invented, so a spindle and distaff (basically two sticks) were used instead.  This was a very laborious process so it could take someone weeks to make enough thread for a toga.  Then the thread was hand dyed with hand made colors that had been hand mined or harvested.  Then it had to be hand woven on a two person vertical loom (again, slow and laborious.)  Then the cloth was cut to a pattern and hand stitched into a toga.  The shoes and belt were equally labor intensive.

Today, with factory farming, cheap fuel, modern irrigation, and pesticides it’s possible to tend thousands of acres planted at densities never before imagined.  Giant combines drive through the field plowing the dirt and sowing the seeds in one pass.  At harvest time specialized combines pick the cotton and other machined separate the seed.  With factory ranching efficiency is the same story with thousands of sheep being tended and shorn in production line fashion. Then trucks deliver the cotton or wool to where it’s washed, combed, and spun into miles of thread in minutes, then dyed with cheap mass production dyes and woven into miles of cloth by machines… again in minutes.  Then the cloth is stacked many layers thick and a computer guided shear cuts out dozens of each of the parts of the suit in a single pass.  The parts go to an assembly plant where workers, who specialize in making the left sleeve, or right leg and such, do so at amazing speed.  Workers that can turn out dozens of suits per day do the final assembly, also at a blazing rate.  Then it’s shipped to a store where you can pick from dozens, or even hundreds of styles, colors, and sizes.  It’s a similar story at the shoe factory that spits out a pair of shoes every few seconds, and the belts that come off the production line by the thousands.

The end result is that the “time value” of the Roman outfit most likely measures in months of human labor, whereas the modern suit contains only a few hours of human time.  This is true of all the other stuff in society as well.  When it comes to the time value contained in stuff… everything today is on sale for a tiny, minuscule fraction of what it once cost.  And as proof to support my thesis I offer this… Today a good percentage of the world’s population has maybe a hundred times more stuff than 99% had 2,000 years ago.  Think about it.  You are surrounded with furniture, cell phones, computers, TVs, refrigerators, grocery stores, cars, planes, hotels, restaurants, a great bed to sleep in at night, and just about anything else that you want.  By contrast 2,000 years ago most people, with the exception of the ruling class, lived a subsistence living barely able to afford the things they needed to survive.  In many cases a great bed or pair of shoes were extravagances they would not experience in their lifetimes.

So if this is true… and it is… then why is gold’s purchasing power so low?  If there’s so much more stuff per person, but the same amount of gold per person… shouldn’t an ounce of gold buy many, many, many times more stuff than it does today?  Absolutely, emphatically, YES… it should.

Then why doesn’t it?

Because of the other big factor in busting this myth… 

In ancient Rome, if you wanted to save some of your wealth for the future there was only one asset available for you to save your purchasing power in… real money… the gold and silver coins that made up their money supply.  Today if you want to save some of your wealth for the future you do so with financial assets such as stocks and/or bonds, and maybe a tiny portion of currency in a checking account.  These highly liquid assets actually compete with gold and silver as a place to store your wealth.  They all dilute each other’s purchasing power.  

So that’s the answer… competing fiat currencies and other financial assets.  In ancient Rome there was only one place to store your wealth… today there are thousands.  The gains in purchasing power that gold should have made due to man becoming so much more efficient at making stuff, have been almost exactly offset by alternative liquid financial assets in which to store that wealth. 

Highly liquid world financial assets (which exclude all real estate, any business not listed on an exchange, and derivatives) total about $230 trillion.  Total world currency, including bank deposits, stands at about $50 trillion.  So that’s a grand total of $280 trillion of liquid assets.  That’s $40,000 worth of wealth per person on the planet stored as transient digits in computers.

Today, investment grade gold (coins and bars) held by the public totals about 1.1 billion ounces and there are about 7.1 billion people on the planet.  That’s 0.15 ounces of gold per person.  At today’s prices it’s about $200 worth of gold per person.  If you include official reserves, such as central bank gold, you get about $400, and if you include all above ground gold, including things like jewelry and religious artifacts… in other words, all the gold ever mined in history, you get about $800 worth of gold per person.  That’s it… That’s all.

With technology, machinery, and super cheap energy we’ve become a thousand times more efficient at producing stuff, and at the same time we’ve created a thousand more ways to store our wealth.  If it weren’t for all those competing currencies and alternative financial assets gold would buy many, many times more stuff.  But even with all this competition, because of the gains in efficiency, an ounce of gold should buy 10 men’s suits today.  And if fiat currencies were to fail (like they always have) then it should buy a hundred or a thousand.

So what happens to those alternate financial assets in the inevitable market crash that lies out there in the future?  Those trusted financial assets suddenly become, hocus-pocus, voodoo, financial assets and their value evaporates, just like those AAA rated Mortgage Backed Securities did in the crash of 2008.  What happens to fiat currencies in the coming currency crisis?  All those currencies become hot potatoes that nobody wants, causing hard assets, like gold and silver, to be bid up to the moon.  Either way, gold will buy a whole lot more stuff someday in the near future.

So you have $40,000 worth of wealth per person stored in alternative liquid assets compared to just $200 per person stored in investment grade gold.  That’s a 200-1 ratio.  That means that in a crisis if just 10% of the wealth invested in those alternative assets were to come chasing gold, its price could rise 20-fold.

The moral of the story is… If you want to buy 20 suits, shoes, and belts a few years from now… buy an ounce of gold today.

2. Add Up Reasons 10-3… It’s All Happening At Once, and It’s Global.

Since 1971 all of the world’s currencies are fiat currencies simultaneously… and all fiat currencies in history have failed. 

The world’s central banks are simultaneously creating fiat currency on a suicidal scale never before imagined. 

Every 30-40 years the world has an entirely new monetary system, but for the first time we will be transitioning from a system based on something that always fails… fiat currencies.  So unlike previous transitions, this transition will be felt by everyone on the planet.

This time there is 10-times the people that can buy gold, each with 10-times the currency, and somewhere between 10 and 1,000-times the number of people with an investor mindset.   That is somewhere between 1,000 and 100,000 times more currency that will someday come chasing gold and silver this time around.

Periodically, throughout history, gold accounts for all of the currency that was created since the last time gold did the accounting.  This time it has to account for a mountain of currency the scale of which has never been seen before. 

We are in completely uncharted territory.  

Real estate, stocks, and bonds are all in bubbles.

The credit/debt and derivatives bubbles threaten the world economy.  

It takes years to create a bubble, but only days or weeks for it to burst… and all bubbles eventually burst. 

In market crashes and currency crisis, trusted investments can sometimes evaporate.

In currency crisis, a stock market crash, or in the final stages of a gold bull market, fear is what drives investors.

When it comes to greed and fear, fear is by far the more powerful emotion.

Gold and silver haven’t been in a bubble for more than 30-years, so the next great bubble will be in gold and silver… It‘s just their turn.

There’s more stuff per person than at any time in history but the same amount of gold.

Competing fiat currencies and alternate financial assets have diluted gold and silver’s purchasing power.  

There is 200 times more wealth invested in liquid assets other than gold.

If 10% of that wealth came chasing gold, its price could rise 20-fold.

And that’s 10%.  In the crisis I see coming, fear should drive a lot more than just 10% of the world’s liquid wealth towards gold and silver.

Knowing this you would think I would take every spare unit of currency I can get my hands on and buy gold.  So why don’t I?  Because silver is undervalued compared to gold.  So I take every spare unit of currency I can get my hands on and buy lots of silver and a little gold.

1. I Sleep Better.

As I said at the beginning of this article, I believe that an economic crisis of historic proportions is headed straight at us, and there is no avoiding it.  Never before have all governments on the planet simultaneously laid down the foundation for the perfect economic storm.  I believe that there will be a global fiat currency crisis that will cause the bubbles in stocks, bonds, and real estate to burst simultaneously.  This will result in the greatest economic crash the world has ever seen.

Things could get pretty bad.  The possibilities range from my being completely wrong and things going pretty much like they are, to a total economic collapse and financial Armageddon from which we never recover.  Toward the bad end is the possibility of the failure of the monetary system, which would raise the likelihood of social unrest (rioting), and disruption of the food supply.

But in any range of possibilities there is something called a bell curve of probabilities.  What that means is that either of the extremes (also called the tail risks) are very unlikely to happen, but that something in the middle is very likely to happen. 

Believe it or not, I am not a doomsayer, but nor do I believe the government when they tell me everything is going to be all right.  

I think it’s going to be something in the middle.  Yes, I believe it’s going to be the greatest crash in history, but I have great hope.  Man is an amazing species.  We have a resilience and ability to adapt and bounce back from anything.  

How have I prepared for the range of possibilities?  I have been accumulating precious metals since 2002.  To me this relieves a lot of anxiety.  And now I have purchased a small supply of emergency food. I found an assortment that will have me eating like a king in an emergency situation.  I have given one of these assortments to each of my family members, my best friends, and all of my employees.  This has relieved any remaining anxieties.

Yes, the stock and real estate markets will probably crash, and for those who are unprepared it will be devastating.  But if it’s going to happen anyway, and if there is nothing I can do about it, then I may as well try to figure out how to turn this catastrophe into the best thing that has ever happened to me.  When I talk about an economic crash, most people get a picture in their head’s of the devastated, bombed-out wastelands left over after a war.  It’s not going to be that way.  All the true wealth, the buildings, the real estate, and the factories will still be there… they’ll just be on sale.  

It is when stocks and real estate are bottoming that I intend to sell my gold and silver and buy up as much true wealth as I can.  

Yes, banks could fail, but new, more efficient ones will take their place.  Yes, the world monetary system could collapse, but this could be a good thing.  If we could make fraud, theft, and conflicts of interest illegal for the banking sector and monetary system, and if we just leave the free market alone and stop manipulating and meddling with it, it would quickly provide us with a new, efficient, stable, and honest monetary system that would increase the prosperity and standard of living for us all.

As I have said many times… there are these brief moments in history where the safest asset class, gold and silver, the safe haven to protect your wealth for the last 5,000 years, simultaneously become the asset class with the greatest potential gains in absolute purchasing power.  I believe we are in one of these episodes right now, and the performance of gold and silver over the last twelve years have proven me correct.

In periods of crisis gold and silver are the asset class that out performs all others.  This decade will see the greatest financial crisis in history.  That means it will also be the greatest wealth transfer in history.  And that means that it is the greatest opportunity in history.

How do I sleep at night?

Very well thank you.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zPQMth_Sne8/story01.htm Tyler Durden