Long Term Charts 2: Western Markets Since The Middle Ages

We previously examined 240 years of US market history for a sense of 'trend' or sustainability but some were not satisfied. In order to get a truly long-term perspective, we reach back 1000 years to The Middle Ages and look at how stock prices, interest rates, commodity prices, and gold have changed in a millennia (and most notably how the key historical events have shaped those price changes).

 

Western Markets Since The Middle Ages

 

Stock Prices

 

Interest Rates

 

Commodity Prices

 

The Gold Price

 

@Macro_Tourist for these increble charts

 

And just for good measure, perhaps the most important chart going forward –  Nothing lasts forever… (especially in light of China's earlier comments )


    



via Zero Hedge http://ift.tt/1cl6P2S Tyler Durden

Here’s What It Looks Like When Your Country’s Economy Collapses

Submitted by Adam Taggart of Peak Prosperity,

Argentina is a country re-entering crisis territory it knows too well. The country has defaulted on its sovereign debt three times in the past 32 years and looks poised to do so again soon.

Its currency, the peso, devalued by more than 20% in January alone. Inflation is currently running at 25%. Argentina's budget deficit is exploding, and, based on credit default swap rates, the market is placing an 85% chance of a sovereign default within the next five years.

Want to know what it's like living through a currency collapse? Argentina is providing us with a real-time window.

So, we've invited Fernando "FerFAL" Aguirre back onto the program to provide commentary on the events on the ground there. What is life like right now for the average Argentinian?

Aguirre began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. He is the author of Surviving the Economic Collapse and sees many parallels between the path that led to Argentina's decline and the similar one most countries in the West, including the U.S., are currently on. Our 2011 interview with him "A Case Study in How An Economy Collapses" remains one of Peak Prosperity's most well-regarded.

Chris Martenson:  Okay. Bring us up to date. What is happening in Argentina right now with respect to its currency, the peso?

 

Fernando Aguirre:  Well, actually pretty recently, January 22, the peso lost 15% of its value. It has devalued quite a bit. It ended up losing 20% of its value that week, and it has been pretty crazy since then. Inflation has been rampant in some sectors, going up to 100% in food, grocery stores 20%, 30% in some cases. So it has been pretty complicated. Lots of stores don't want to be selling stuff until they get updated prices. Suppliers holding on, waiting to see how things go, which is something that we are familiar with because that happened back in 2001 when everything went down as we know it did.

 

Chris Martenson:  So 100%, 20% inflation; are those yearly numbers?

 

Fernando Aguirre:  Those are our numbers in a matter of days. In just one day, for example, cement in Balcarce, one of the towns in Southern Argentina, went up 100% overnight, doubling in price. Grocery stores in Córdoba, even in Buenos Aires, people are talking about increase of prices of 20, 30% just these days. I actually have family in Argentina that are telling me that they go to a hardware store and they aren't even able to buy stuff from there because stores want to hold on and see how prices unfold in the following days.

 

Chris Martenson:  Right. So this is one of those great mysteries of inflation. It is obviously 'flying money', so everyone is trying to get rid of their money. You would think that would actually increase commerce. But if you are on the other end of that transaction, if you happen to be the business owner, you have every incentive to withhold items for as long as possible. So one of the great ironies, I guess, is that even though money is flying around like crazy, goods start to disappear from the shelves. Is that what you are seeing?

 

Fernando Aguirre:  Absolutely. Shelves halfway empty. The government is always trying to muscle its way through these kind of problems, just trying to force companies to stock back products and such, but they just keep holding on. For example, gas has gone up 12% these last few days. And there is really nothing they can do about it. If they don't increase prices, companies just are not willing to sell. It is a pretty tricky situation to be in.

 

Chris Martenson:  Are there any sort of price controls going on right now? Has anything been mandated?

 

Fernando Aguirre:  As you know, price controls don't really work. I mean, they tried this before in Argentina. Actually, last year one of the big news stories was that the government was freezing prices on food and certain appliances. It didn't work. Just a few days later those supposedly "frozen" prices were going up. As soon as they officially released them, they would just double in price.

 

Chris Martenson:  Let me ask you this, then: How many people in Argentina actually still have money in Argentine banks in dollars? One of the features in 2001 was that people had money in dollars, in the banks. There was a banking holiday; a couple of weeks later, banks open up; Surprise, you have the same number in your account, only it's pesos, not dollars. It was an effective theft, if I could use that term. Is anybody keeping money in the banks at this point, or how is that working?

 

Fernando Aguirre:  Well, first of all, I would like to clarify for people listening: Those banks that did that are the same banks that are found all over the world. They are not like strange South American, Argentinean banks – they are the same banks. If they are willing to steal from people in one place, don't be surprised if they are willing to do it in other places as well.

Click the play button below to listen to Chris' interview with Fernando Aguirre (36m:42s):

 


    



via Zero Hedge http://ift.tt/1eGp5JY Tyler Durden

Here's What It Looks Like When Your Country's Economy Collapses

Submitted by Adam Taggart of Peak Prosperity,

Argentina is a country re-entering crisis territory it knows too well. The country has defaulted on its sovereign debt three times in the past 32 years and looks poised to do so again soon.

Its currency, the peso, devalued by more than 20% in January alone. Inflation is currently running at 25%. Argentina's budget deficit is exploding, and, based on credit default swap rates, the market is placing an 85% chance of a sovereign default within the next five years.

Want to know what it's like living through a currency collapse? Argentina is providing us with a real-time window.

So, we've invited Fernando "FerFAL" Aguirre back onto the program to provide commentary on the events on the ground there. What is life like right now for the average Argentinian?

Aguirre began blogging during the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career to educating the public about his experiences and observations of its lingering aftermath. He is the author of Surviving the Economic Collapse and sees many parallels between the path that led to Argentina's decline and the similar one most countries in the West, including the U.S., are currently on. Our 2011 interview with him "A Case Study in How An Economy Collapses" remains one of Peak Prosperity's most well-regarded.

Chris Martenson:  Okay. Bring us up to date. What is happening in Argentina right now with respect to its currency, the peso?

 

Fernando Aguirre:  Well, actually pretty recently, January 22, the peso lost 15% of its value. It has devalued quite a bit. It ended up losing 20% of its value that week, and it has been pretty crazy since then. Inflation has been rampant in some sectors, going up to 100% in food, grocery stores 20%, 30% in some cases. So it has been pretty complicated. Lots of stores don't want to be selling stuff until they get updated prices. Suppliers holding on, waiting to see how things go, which is something that we are familiar with because that happened back in 2001 when everything went down as we know it did.

 

Chris Martenson:  So 100%, 20% inflation; are those yearly numbers?

 

Fernando Aguirre:  Those are our numbers in a matter of days. In just one day, for example, cement in Balcarce, one of the towns in Southern Argentina, went up 100% overnight, doubling in price. Grocery stores in Córdoba, even in Buenos Aires, people are talking about increase of prices of 20, 30% just these days. I actually have family in Argentina that are telling me that they go to a hardware store and they aren't even able to buy stuff from there because stores want to hold on and see how prices unfold in the following days.

 

Chris Martenson:  Right. So this is one of those great mysteries of inflation. It is obviously 'flying money', so everyone is trying to get rid of their money. You would think that would actually increase commerce. But if you are on the other end of that transaction, if you happen to be the business owner, you have every incentive to withhold items for as long as possible. So one of the great ironies, I guess, is that even though money is flying around like crazy, goods start to disappear from the shelves. Is that what you are seeing?

 

Fernando Aguirre:  Absolutely. Shelves halfway empty. The government is always trying to muscle its way through these kind of problems, just trying to force companies to stock back products and such, but they just keep holding on. For example, gas has gone up 12% these last few days. And there is really nothing they can do about it. If they don't increase prices, companies just are not willing to sell. It is a pretty tricky situation to be in.

 

Chris Martenson:  Are there any sort of price controls going on right now? Has anything been mandated?

 

Fernando Aguirre:  As you know, price controls don't really work. I mean, they tried this before in Argentina. Actually, last year one of the big news stories was that the government was freezing prices on food and certain appliances. It didn't work. Just a few days later those supposedly "frozen" prices were going up. As soon as they officially released them, they would just double in price.

 

Chris Martenson:  Let me ask you this, then: How many people in Argentina actually still have money in Argentine banks in dollars? One of the features in 2001 was that people had money in dollars, in the banks. There was a banking holiday; a couple of weeks later, banks open up; Surprise, you have the same number in your account, only it's pesos, not dollars. It was an effective theft, if I could use that term. Is anybody keeping money in the banks at this point, or how is that working?

 

Fernando Aguirre:  Well, first of all, I would like to clarify for people listening: Those banks that did that are the same banks that are found all over the world. They are not like strange South American, Argentinean banks – they are the same banks. If they are willing to steal from people in one place, don't be surprised if they are willing to do it in other places as well.

Click the play button below to listen to Chris' interview with Fernando Aguirre (36m:42s):

 


    



via Zero Hedge http://ift.tt/1eGp5JY Tyler Durden

The Likeness of God is to Create not Consume

4737723191_49399883ee_z

The following post written by Bruno de Landevoisin on February 2nd, 2014, first appeared on The Slope of Hope.  I implore you to spend a few minutes taking it in, as it’s the real deal and well worth the read. The version on Slope is far more sentimental, for reasons that will be apparent if you read the original.

The astonishingly mesmerizing supernatural image pictured above is of the Temple of Poseidon in Greece, off the cliffs of Sounion, facing the Mediterranean sea.  My friends, If that sight does not take you outside of yourself and onto something else, I’m not sure anything will.  Trust me on this, as I have had the good fortune to have actually been there myself, and it is indeed spectacular.

The Likeness of God is to Create not Consume.  Ingenuity and innovation are hallmarks of our human creativity. Curiously, those marvelous characteristics unique to mankind, which have delivered the most astoundingly advanced technological productivity gains ever conceived, are now fast displacing a multitude of relatively menial jobs previously attended to by human beings, who having been anchored to unsatisfying and unfulfilling laborious routines, were less able to enjoy the free time and space certainly required to become more creative enlightened beings themselves.

Surely, the simple answer to our current macro economic dilemma, namely low growth with vanishing jobs, is to once again call upon our God given human ingenuity and innovation, so as to quite simply redesign and rearrange the furniture in our grand house more adeptly.  If we so choose, we can freely create more, we can joyously labor less, and we no longer must be slaves to the degradation of excess consumption.  See how that works?

A word of caution, getting there will not be plain sailing and rather tempestuous I’m afraid.  Change will be vigorously opposed and resolutely resisted, particularly by those who have attained much power, privilege and affluence, as they have been conditioned to measure and value their own success, sense of significance and acquired tenure in the presently established order of society. They will understandably do all in their power to defend and cling onto an organized societal system and set of values, where they have clear vested interests and which has seemingly served them so well, no matter how obviously clear it is that the world around them is increasingly becoming unglued before our very eyes. The desperation of the QE monetary policy dependency itself, is but a misguided manifestation of the dangerous hubris and arrogance that puts forth and fiercely holds on to an obtuse refusal to acknowledge and accept the reality of the inevitable change in the winds that is now howling so vociferously upon us.

Purposely degrading this Nation’s hard earned reserve currency status, which was so honorably passed on to us by previous generations who built this great country from the ground up with their virtuous and industrious blood, sweat and tears, only to then implement a disgraceful monetary policy that deliberately steals from future unborn generations in order to facilitate living standards beyond our means, so as to sustain an unearned, undeserved and unprincipled culture of grotesque illegitimate debt financed over-consumption, can only be characterized as a deplorable unconscionable abomination of Biblical proportion.

We physically finite mortals just so happen to inhabit a physically limited globe also made up of finite resources, inevitably, the days of unlimited growth and excess mass consumption must be expeditiously put behind us. To artificially sustain this decadent overindulgence via unsustainable debt financing is absurdly short sighted lunacy which borders on sheer insanity. Either we adapt or we die, same as it ever was.

This free choice which has been divinely granted to us is entirely ours to make.  Get your heads out of your collective asses!  Let’s get to it, before it forces are mortal hands………..


    



via Zero Hedge http://ift.tt/1eKTkhf Tim Knight from Slope of Hope

Good News About Our Ageing Population

A week doesn’t go by without hearing about the problems which will be created by the world’s rapidly ageing population. Much of the focus is on how fewer people will mean lower future economic growth. The likes of Harry Dent have popularised the idea but it’s also been given intellectual heft by thousands of demographic consultants.

There’s no doubt that the world is getting older. Many will be surprised to learn that even Asia has serious issues on this front. For instance, fertility rates in South Korea, Hong Kong and Singapore are below those of European countries such as Italy and Germany, which are most commonly associated with demographic problems.

The post today though will look at the silver linings associated with ageing demographics. Older populations don’t necessarily equate to lower economic growth. Boosting productivity is the key to offsetting declining working-age populations. Without it, there will indeed be much lower growth but we’re hopeful that the seriousness of the issue will prompt real solutions to address productivity.

Also, having fewer people in future may end up being the best thing that could have happened to us. There’s considerable evidence that we’re now living in a resource-constrained world. One where we may soon face a food crisis as agricultural inventories dip to decade lows thanks to lower crop yields and increased demand from Asia. Fewer people should mean reduced resource consumption and may actually save us from not having enough food to feed the planet.

For investors, ageing demographics and resource constraints do mean the odds favour slower economic growth in the decades ahead. Yet these issues will also create some tremendous investment opportunities in areas such as biotechnology, robotics, agriculture, and renewable energy.

Yes, we’re rapidly ageing
I’m not going to detail how the world is rapidly ageing as it’s been done ad nauseam. Suffice to say that many don’t quite comprehend how quickly the process is taking place.

For instance, many government agencies predict peak world population of around 8 billion by 2050. What’s more interesting is that much of the population growth will occur in Africa. Ex-Africa, the world’s population could peak around 6.5 billion as early as 2040. Below is the optimistic case as outlined by the U.N..

World population and projection, 1950-2100

Let’s put that into context. I’m 38 years of age. Within my lifetime, I’m likely to witness a declining global population. Moreover, I may be reaching retirement age when the world population, ex-Africa, starts to fall. Unless, of course, our governments lift the retirement age to 80, which can’t be ruled out!

The key driver to slowing population growth is declining fertility rates. And the causes of these falling rates include advances in birth control and improved education of women.

The numbers on fertility rates are staggering. It’s no surprise that many developed countries now have fertility rates well below so-called replacement rates, with Europe featuring prominently.

Low birth rates in western world

What’s less known is that Asia faces a similar predicament to the West. China’s birth rate has declined from 6 in the 1960s to 1.5 today. South Korea, Singapore and Hong Kong all have birth rates among the lowest in the developed world. Even below the likes of Italy!

Falling populations in Asia

Africa and parts of the Middle East are the primary areas where fertility rates are well above replacement rates. Greater populations are the last thing that many of these areas need though.

Africa, Mid East fertility rates

Ageing doesn’t equal lower growth
There’s a widespread assumption that an ageing demographic profile invariably leads to lower economic growth. Japan is often held up as proof of this.

The assumption has several flaws:

  1. Historical experience suggests that you can have strong, above-trend economic growth in places where populations are ageing. Venice in the 11th century and the Dutch Republic in the 14th century are prime examples.
  2. Modern-day experience also pokes some holes in the theory. If population alone led to stronger economic growth, then Africa today should be shooting the lights out. Only it isn’t.
  3. The underlying flaw is that population growth is only one-half of the GDP equation. GDP growth equals population growth plus productivity growth. You can have zero population growth and still be growing GDP via productivity enhancements.

Of course, ageing demographics make it more likely that a country will have slower economic growth. To explain this further, let’s look at a concrete example in China.

South China Morning Post columnist, Tom Holland, had a good article on this over the past week.  He explained the maths behind why China GDP growth should soon slow sharply to 6% or below.

He first used an an analogy to explain GDP growth:

“If you run a sausage factory, there are three ways that you can increase the output of sausages. You can employ more staff to make them. You can invest in new sausage-making-machinery.

Or you can use the staff and machines that you already have more efficiently.”

The first two factors are easy to measure but the third isn’t, and it’s referred to by economists as Total Factor Productivity, or TFP.

China has some big issues. Its working-age population peaked in 2012. That means it has less people to make the proverbial sausages.

It also has had a big drop-off in TFP in recent years. The country’s GDP growth has been held up by greater investment in physical capital. Or investment in new sausage-making machines, using Mr Holland’s analogy.

China TFP

The problem is that the working-age population is set to decline further. And China wants to reduce investment in favour of consumption as the government has recognised that it’s been too reliant on the former. Consequently, investment could easily decline by one-third in future.

It means China will need a big lift in TFP for GDP growth to be maintained at current levels. That seems improbable.

People forecasting 5% GDP growth in China in the near future are often referred to as extreme bears. But the maths suggest that it’s a pretty realistic scenario.

In sum, an ageing population doesn’t directly correlate to slowing economic growth. But it makes it more likely.

Add resource constraints and there’s an issue 
In my view, the other key issue in coming decades which receives much less attention is that of an increasingly resource-constrained world. It’s the combination of this and ageing demographics which makes for increased odds for a slower growth world.

Two weeks ago, I did a post reviewing a book called Life After Growth, discussing resources constraints. It received more comments than any other piece that I’ve ever done. There were lots of strong opinions, vested interests and plenty of believers in technology overcoming any future obstacles.

I won’t repeat the previous post but simply point out that there’s considerable evidence of resources being much harder to find and more costly. And in some cases, we’re just running out.

In the case of oil for example, U.S. production from conventional sources peaked in the early 1980s. Since then, growth of unconventional sources has resulted in very modest growth in total oil production. Unconventional oil primarily means offshore drilling, which is much more costly. Not surprisingly, higher oil costs have resulted in elevated oil prices.

Conventional oil declines

Yes, there’s all kinds of work into producing more oil via unconventional means. Tar sands and share oil are examples. The problem is that both of these are tremendously expensive and energy inefficient. In 20 years time, both may well be considered the Kodaks of the energy world (technology bypassed by better quality, low cost means).

The likes of solar and wind power do offer some hope, though both are still too costly to compete with hydrocarbons, but that should change over the next few decades.

Regarding constrained resources, I’d also point to metal ore grades, which are rapidly declining in most cases. Take gold and copper as examples.

gold ore grades

Copper grade

Declining grades mean they’re much harder to find and much more costly to bring to production.

Lastly, let’s look at agriculture, where perhaps the most acute shortages are present. The common assumption is that we have a lot of land available for agriculture. That’s true. But the issue is that the amount of prime agricultural land is declining.

That’s resulting in reduced crop yield growth. Thus, crop yield growth has dropped from 3.5% per annum in the late 1960s to 1.25% now. The latter figure is still ok, of course. The issue is that it’s closing in on global population growth of 1%. Further falls in crops yields do not bode well!

You may ask what these resource constraints have to do with future economic growth. Well, as explained in my book review, cheap energy has been the principal driver for economic growth since 1750. If the era of cheap energy is over, then growth may be impacted too.

And, no, technology is highly unlikely to save the day. Via the comments to my aforementioned book review, I was amazed by the number of people who had faith in technology to fix our energy issues and ultimately boost economic output. There’s little doubt that we live in an age of technological optimism.

But here are a few things that should trouble these optimists:

  • Over the past two decades in the U.S., economic growth has slowed markedly from previous decades despite technological progress. Sorry but Apple and Twitter don’t move the dial on economic productivity, with the latter reducing productivity if my experience is anything to go by.
  • Technological improvements weren’t able to stop conventional oil production from peaking. Despite trillions of dollars in spending.
  • Technology wasn’t able to prevent mining ore grades from deteriorating.
  • And technology wasn’t able to stop crop yields from sharply declining.

The faith in technology to solve problems from ageing demographics and resources constraints seems to be contrary to much of recent experience. That doesn’t mean it can’t happen but I wouldn’t bet on it.

The upside of ageing
Right, the outlook appears fairly gloomy thus far. Where’s the bright side in all of this, you may ask? In my view, there are a couple of key silver linings to a world rapidly getting older:

  1. Over the next decade or two, the issue will reach a critical stage where politicians and policy makers will be forced to provide solid solutions to boost productivity and economic growth. Without these solutions, growth could fall to levels no one will like. In other words, a crisis is more likely to result in concrete action. Of course, skeptics will point to the 2008 credit crisis and the distinct lack of reform since as reason to doubt that real change will take place. And I’ve got a lot of sympathy for that view. However, the seriousness of the ageing and resource constraint issues may end up dwarfing that of the recent credit crisis and I remain hopeful that will force change. And by change, I mean long-term investments in innovation, education and technology in order to lift economic productivity.
  2. Fewer people on the planet post-2050 may not be the disaster that many economists make it to be. In fact, it could be the best thing that could have happened. It may reduce resource consumption and alleviate some of the important concerns around food availability in future.

If we do get ground-breaking reform and a declining global population, then we may end up in a boring, slow growth world. But that mightn’t be a bad thing given the economic volatility of recent times. And more importantly, we’d have a much more sustainable growth model.

Investor takeaways
The key takeaways for investors from all of this are:

  • You should prepare for a slower growth world. Ageing demographics and resource constraints make it more likely than not.
  • Parts of the the world’s fastest growing region, Asia, appear particularly vulnerable. That’s because favourable demographics and cheap resource extraction have provided significant tailwinds to economic growth of late. And those trends are set to reverse.
  • Investment returns may be lower than in previous decades. Given this and the ageing demographics, yields/dividends on assets should take on greater importance. In other words, the current search for yield may not be cyclical, but generational.
  • You’d think the search for yield would create a natural demand for the safety of bonds, but given current pitifully low bond yields, that may not be the case.
  • That could create sustained, long-term demand for the likes of commercial and industrial property. Residential property in most countries offers much lower yields than these other property segments and therefore won’t be as attractive.
  • Yield in appreciating currencies will be important. Particularly given the current determination of central bankers to debauch their currencies. We prefer Asian currencies over the West given sounder balance sheets. On a long-term basis, we like the Chinese yuan (though not on short-term basis), as well as the Singapore and New Zealand dollars.
  • Specifically on stocks, you should not only consider those with sustainable, strong yields but also look at how the potential for elevated resource prices may impact companies in your portfolio.
  • There will also be significant investment opportunities in areas which provide solutions to some of problems of ageing demographics and resource constraints. Robotics to improve work productivity, for example. Biotech to help us live (and work) longer. Healthcare technology which helps mitigate rising healthcare spending. And in agriculture and renewable energy as resources constraints become more urgent.

AC Speed Read

– There’s much doom and gloom commentary on the world’s ageing demographics, popularised by the likes of Harry Dent.

– But there are important silver linings not often mentioned: an older world doesn’t have to result in slower economic growth if we can boost productivity and a declining population in future decades could put us on a more sustainable path in a resource-constrained world.

– The twin themes of ageing and resource constraints do mean though that the odds still favour lower economic growth in coming decades and investors should prepare their portfolios accordingly.

– But these themes will also provide some tremendous investment opportunities in the likes of biotechnology, agriculture, renewable energy and robotics.

This post was originally published at Asia Confidential:
http://ift.tt/1gbEY9x


    



via Zero Hedge http://ift.tt/1bKlnfv Asia Confidential

Europe Stunned, Angry As Switzerland Votes To Curb Immigration

This wasn’t supposed to happen. At a time when the European Union, reeling from the ongoing near collapse of the Eurozone, has been preaching its key benefits – the removal of borders and the free transit of labor – moments ago Switzerland, with a tiny majority of 50.4% of voters, voted in favor of new immigration curbs which requires the government to set an upper limit for foreigners, risking a backlash from the (utterly toothless) European Union.

In some ways this was a vote of the urban vs rural population: Voters in the cities of Zurich and Basel and cantons in western Switzerland opposed the measures, while those in rural German- speaking cantons and the Italian-speaking region of Ticino backed it, reports Bloomberg.

The problem for Europe is that the backlash against immigration was supposed to be a PIIG thing, having led to the surge of such nationalist parties as Golden Dawn in Greece, but they don’t matter as the will of the “peripheral” people is completely ignored in Europe. However, now that one of Europe’s most successful nations has opined against the free importing of labor, despite the prevalent perception that it has been one of the biggest beneficiaries of immigration, Switzerland has just left Europe’s pro-migration propaganda in shambles. To wit, from Bloomberg:

Immigration has supported economic growth, and the EU bloc is Switzerland’s top export destination. Roughly a fifth of its 8 million inhabitants come from abroad. About 45 percent of employees in its chemical, pharmaceutical and biotech industry are foreigners, according to scienceindstries, an association whose members include drugmakers Roche Holding AG and Novartis AG, and food company Nestle SA.

 

We do need to hire talented individuals,” Credit Suisse Group AG Chief Executive Officer Brady Dougan told reporters on Feb. 6. “Having access to talent is something that’s important for all the businesses here.”

 

In the run-up to the vote, the initiative “against mass immigration” pitted companies small and large against the euro- skeptic Swiss People’s Party SVP, the biggest in the lower house of parliament. Corporations argued they need top talent from around the world to maintain their competitive edge, while critics, many of them members of the SVP, said the flood of newcomers is leading to worse working conditions, crowded trains and a housing shortage.

The unexpected outcome may lead to some dramatic consequences for Switzerland: according to Thomas Kern, chief executive officer of Zurich Airport, a “yes” to the vote could even jeopardize the country’s aviation industry by forcing the re-negotiation of landing rights. “A lot is at stake,” he told the newspaper Blick in an interview published on Feb. 7.

In response about public unease about the number of newcomers, the government already enacted yearlong curbs on residence permits for citizens of EU countries including Germany and France. There are also quotas for citizens of non-EU countries such as Australia and Canada.

Ironically, it could get even worse for fans of free labor movement before it gets better: “in a sign of how anxious the Swiss population is about foreigners, another initiative, which would cap the immigration rate at 0.2 percent of the resident population, is in the pipeline. The government, which opposes that measure too, hasn’t set a voting date yet.”

What remains unsaid here is that immigration will be the least of Swiss worries if, as the SNB has been warning for the past week, the Swiss housing market – already in an unprecedented bubble – undergoes a controlled demolition, precisely at a time when foreigners suddenly find themselves no longer welcome in the one-time netural utopia nestled within the tranquility of the Alps.

Regardless of the outcome for the Swiss economy, Europe is furious:

The vote also risks creating a rift between Switzerland and the EU, its biggest trading partner. The decision to open the borders 12 years ago was negotiated as part of a package of agreements that allow Swiss companies access to the common market, the government has warned.

 

According to European Commission President Jose Barroso, the free movement of persons was of “fundamental importance” and cannot be separated from the free exchange of goods, services and capital. “Within the framework of the bilateral agreement there are certain legal consequences,” Barroso told the Neue Zuercher Zeitung in an interview last November.

 

“That’s the open question — one doesn’t know what the EU will do,” said Andreas Ladner, professor of public administration at the University of Lausanne. “The EU has indicated that the initiative violates its free movement of people and won’t be tolerated.”

So now that the unthinkable has happened, just what will the unelected European bureaucrats do to enforce its “untoleration” of the Swiss democratic vote”: invade the mountainous country? Hardly.

Instead Europe will content itself with doing the only thing it knows how to do: use harsh language, in this case the following email it blasted out angrily in the aftermath of the Swiss vote, saying that “the European Commission regrets that an initiative for the introduction of quantitative limits to immigration has been passed by this vote. This goes against the principle of free movement of persons between the EU and Switzerland.”

Most importantly, it also goes against the core European principle of ignoring what the majority wants because everyone in centrally-planned, banker-controlled, insolvent European nations knows- only a few “good” unelected bureaucrats know what is best for everyone. As such the democratic vote must always be ignored, especially when it goes against the thesis preached by the politicians, the central bankers, and, of course, Goldman Sachs.


    



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

Blythe Masters Withdraws From CFTC : Furious Twitter Backlash Blamed

Following our post yesterday which included the occasional F-bomb and got well over 40K reads since its posting late last night, the reaction was sharp and severe. So severe in fact that less than 24 hours later, Blythe Master has withdrawn from the CFTC. The culprit for Masters’ resignation in just 24 hours? A very angry Twitter.

From Bloomberg

Blythe Masters, JPMorgan Chase & Co.’s commodities head, withdrew from an advisory committee of the U.S. Commodity Futures Trading Commission a day after her appointment was disclosed,  according to two people with direct knowledge of the decision.

 

The regulator may include another executive from New York-based JPMorgan on the committee, said one person close to the bank who requested anonymity because the move hasn’t been publicly announced. Masters, 44, withdrew because the company’s sale of its physical commodities unit will keep her occupied, the person said.

 

JPMorgan is selling a division that deals in assets such as metals and oil, as government watchdogs examine whether federally backed lenders should be involved in such markets. Masters’s appointment drew criticism from Twitter users who questioned the propriety of her advising the regulator of futures and swaps.

 

Masters, whose appointment was listed on the CFTC’s website yesterday, had been scheduled to participate in a Feb. 12 meeting to discuss cross-border guidance on rules. She was invited to the panel by acting Chairman Mark Wetjen, said one of the people.

 

Brian Marchiony, a JPMorgan spokesman, said the company had no comment.

Perhaps there is some justice in the world.

We do, however, have one question for Ms. Masters even though we understand she will be “very occupied due to the sale of JPM’s physical commodities unit”: does this premature resignation confirm that the allegations against the JPMorganite, who had so far been wrapped up in “neither admissions nor denials“, are in fact true and accurate? 

And while we have her attention, can Ms. Masters also please advise what other markets she was manipulating?


    



via Zero Hedge http://ift.tt/1iC0lRy Tyler Durden

Barclays’ Busted For Stealing, Selling Confidential Financial Data Of Thousands Of Clients

In recent months, the attention of the public has been consumed by concerns over private data abuse by such public spy agencies as the NSA, as well as what personal financial information may have been intercepted by rogue hacker black hats who in the past two months have been blamed for millions in credit card privacy breaches. However, so far there have been two major loose ends in the story of personal data collection (and abuse): just how web search browsers and cookie-based advertising companies collect everything there is to know about the particular interests and desires of any given individual, and just as importantly, how banks abuse client confidentiality by taking the secret financial data of their clients less than seriously.

Today, one of these loose ends got some much needed public exposure after the Daily Mail, of all places, reported that it had been approached by a whistleblower, who revealed that in one of the biggest breaches of bank secrecy, bailed out Barclays had stolen and sold the confidential personal and financial data of up to 27,000 clients to the highest market bidder, in most cases rogue traders who had seen Glengarry Glen Ross one too many times, and who would then use Jordan Belfort-inspired tactics to sell money losing investment products to those unlucky thousands who had entrusted their data to the bank.

Is this the case of yet another “Snowden” growing a conscience and exposing the fraud he had witnessed for all to see? For the time being, it sure looks like it:  “This is the worst [leak] I’ve come across by far,’ said the  former commodity broker and whistleblower. ‘“But this illegal trade is going on all the time in the City. I want to go public to stop it getting bigger.”

From the Mail:

Barclays Bank is reeling from an unprecedented security breach after thousands of confidential customer files were stolen and sold on to rogue City traders.

 

In the worst case of data loss from a British High Street bank, highly sensitive information, including customers’ earnings, savings, mortgages, health issues and insurance policies, ended up in the hands of unscrupulous brokers. The data ‘gold mine’ – also containing passport and national insurance numbers – is worth millions on the black market because it allowed unsuspecting individuals to be targeted in investment scams.

 

Barclays last night launched an urgent investigation and promised to co-operate with police.

 

It is not clear how the records were stolen, but the bank could face an unlimited fine if found guilty of putting customers’ details at risk. 

 

The leak was exposed by an anonymous whistleblower who passed The Mail on Sunday a memory stick containing files on 2,000 of the bank’s customers.

 

He claimed it was a sample from a stolen database of up to 27,000 files, which he said could be sold by shady salesmen for up to £50 per file.

Of course, Barclays has had its share of legal troubles in recent years, having been exposed as the first bank in the still growing Libor-rigging scandal for which is was fined GBP290 million, and now this data loss, which is a breach of its obligations under the Data Protection Act to keep personal information secure, will almost certainly cost its many more hundreds of millions in legal fees and damages.

The sources of the breached and stolen files was data collected from customers who had sought financial advice from the bank, and passed on their details during meetings with an adviser. The consultations included filling out questionnaires – or ‘psychometric tests’ – which revealed their attitude to risk. That information could be exploited to persuade victims to buy into questionable investments.

One could call them, the “Glengarry leads”, and an example of one is shown below:

But while Barclays collecting detailed data about its clients is perfectly normal, what it did next is criminal:

The whistleblower first became aware of the Barclays leads in September when the boss of the brokerage firm asked him to sell them to other traders. ‘The obvious question I asked was, “These are fantastic leads, why are you not using them yourself?”

 

‘He replied, “We have – sell it as secondary data.” He had got all he could out of them. New, they were worth £50 per file. He asked us to sell for £8.’

 

The whistleblower showed the leads to a select group of brokers ‘who thought they were amazing’, but eventually decided not to sell.

 

‘My conscience got the better of me. It was all just so wrong,’ he said. ‘I wasn’t a broker myself at this stage, but I had a business link to the firm.’

 

Between December 2012 and September 2013 the firm persuaded victims to buy rare earth metals that did not exist, it is claimed. The whistleblower estimates up to 1,000 people could have been ‘scammed’.

Then the party was over as quickly as it started:

When the investors began to suspect they were being fleeced he said the boss chose to ‘shut the trading floor’.

 

His orders were to get rid of the evidence, to show that we were never there. We bleached the desks so his DNA was not in the office. We destroyed his laptop and 15 bags of paperwork. We wiped the computers. During this fiasco he asked me, “Have you got the Barclays leads?” I said, “No, I haven’t, they must have been destroyed”. ‘But I kept them because I thought the whole thing had gone too far. I want to stop it now, to tell people what was happening.’

Alas, the burning down of the crime scene was not enough, and now that Barclays has been exposed, the damage control begins:

Barclays said in a statement: ‘We are grateful to The Mail on Sunday for bringing this to our attention and we contacted the Information Commissioner and other regulators on Friday as soon as we were made aware. ‘Our initial investigations suggest this is isolated to customers linked to our Barclays Financial Planning business, which we ceased  in 2011.

 

‘We will take all necessary steps to contact and advise those customers as soon as possible so that they can also ensure the safety of their personal data. ‘Protecting customers’ data is a top priority and we take this issue extremely seriously. This appears to be criminal action and we will co-operate with the authorities on pursuing the perpetrator.

 

‘We would like to reassure all of our customers  that we have taken every practical measure to ensure that personal and financial details remain as safe and secure as possible.’ The Mail on Sunday has arranged to pass on the data to the Information Commissioner’s Office. A spokesman said: ‘We’ll be working with The Mail on Sunday this week as well as working with the police.’

That’s not all: we also learn that the legacy of the Wolf of Wall Street is alive and well. So alive in fact, he has been in ongoing consultations on how to cold call clients about which the sellers already knew everything in advance:

Brokerages want to hire people who are money-oriented, articulate and who speak the Queen’s English. Their ideal is the young, hungry white guy. They want the most aggressive person, very manipulative and bullish, almost like a New York broker in the 1980s.

In the first interview they would ask: ‘Do you **** whores and sniff coke? Do not come and work here if you don’t.’ They might even ask the interviewee to sing a song. They want to see if they can bend them over a barrel and get them to do what they want. Out of 10,000 brokers, 9,000 will be earning below the minimum wage. The majority will never succeed. The successful ones do not have a moral compass.

 

Most people drop out after a couple of years because they burn out but I know old school brokers who’ve done it since the 1980s. 

 

We got trained by Jordan Belfort, the real-life Wolf of Wall Street. It cost £38,000 for an hour’s conference call with him from New York. Three different firms took part and there were 40 brokers in the room, sitting around a phone.

 

He’s big on ‘rapport building’. He shows how to apply pressure in the right places – how to manipulate people in a controlled way. In all cases, brokers try to find the person’s motive for investing. When trust is established  it’s very easy to make the ale or ‘load’ a client with a commodity. Loaders are a breed of broker and some can earn 40 per cent a deal on just the commission.

A lot of contracts between broker and investor include ‘exit confirmation’ – the date when the return on investment is expected. But in many cases those clauses are a lie. A month or two before the exit strategy is due, the firm winds up and disappears.

 

The owners – criminals in sharp suits – will set up shop, trade for a bit, then the company will close, only for the brokers to open another one.

 

The next day they ring the same clients, but with different voices on the end of the phone. You might use a different name – nobody uses their real name. Many on the Barclays list were born in the 1930s. Old people are perfect targets because they are more trusting and they haven’t got long left. You hope they die before your exit strategy comes up.

Hopefully this anecdote serves to illustrate the link between insolvent but bailed out and cash-strapped banks, boiler rooms, and criminal salespeople.

Finally, it goes without saying, that if this is happening in the UK it most certainly taking place in the US as well. And as a follow up – while the general public has every right to be concerned about how its private data is being abused by public spy entities such as the NSA, perhaps it is time to inquire just how it may be abused not only by private banks such as Barclays, but by all those private corporations who interact daily with the countless users who share their data on the Internet assuming that it won’t be used in a criminal fashion by virtually everyone.


    



via Zero Hedge http://ift.tt/1giHZn7 Tyler Durden

Barclays' Busted For Stealing, Selling Confidential Financial Data Of Thousands Of Clients

In recent months, the attention of the public has been consumed by concerns over private data abuse by such public spy agencies as the NSA, as well as what personal financial information may have been intercepted by rogue hacker black hats who in the past two months have been blamed for millions in credit card privacy breaches. However, so far there have been two major loose ends in the story of personal data collection (and abuse): just how web search browsers and cookie-based advertising companies collect everything there is to know about the particular interests and desires of any given individual, and just as importantly, how banks abuse client confidentiality by taking the secret financial data of their clients less than seriously.

Today, one of these loose ends got some much needed public exposure after the Daily Mail, of all places, reported that it had been approached by a whistleblower, who revealed that in one of the biggest breaches of bank secrecy, bailed out Barclays had stolen and sold the confidential personal and financial data of up to 27,000 clients to the highest market bidder, in most cases rogue traders who had seen Glengarry Glen Ross one too many times, and who would then use Jordan Belfort-inspired tactics to sell money losing investment products to those unlucky thousands who had entrusted their data to the bank.

Is this the case of yet another “Snowden” growing a conscience and exposing the fraud he had witnessed for all to see? For the time being, it sure looks like it:  “This is the worst [leak] I’ve come across by far,’ said the  former commodity broker and whistleblower. ‘“But this illegal trade is going on all the time in the City. I want to go public to stop it getting bigger.”

From the Mail:

Barclays Bank is reeling from an unprecedented security breach after thousands of confidential customer files were stolen and sold on to rogue City traders.

 

In the worst case of data loss from a British High Street bank, highly sensitive information, including customers’ earnings, savings, mortgages, health issues and insurance policies, ended up in the hands of unscrupulous brokers. The data ‘gold mine’ – also containing passport and national insurance numbers – is worth millions on the black market because it allowed unsuspecting individuals to be targeted in investment scams.

 

Barclays last night launched an urgent investigation and promised to co-operate with police.

 

It is not clear how the records were stolen, but the bank could face an unlimited fine if found guilty of putting customers’ details at risk. 

 

The leak was exposed by an anonymous whistleblower who passed The Mail on Sunday a memory stick containing files on 2,000 of the bank’s customers.

 

He claimed it was a sample from a stolen database of up to 27,000 files, which he said could be sold by shady salesmen for up to £50 per file.

Of course, Barclays has had its share of legal troubles in recent years, having been exposed as the first bank in the still growing Libor-rigging scandal for which is was fined GBP290 million, and now this data loss, which is a breach of its obligations under the Data Protection Act to keep personal information secure, will almost certainly cost its many more hundreds of millions in legal fees and damages.

The sources of the breached and stolen files was data collected from customers who had sought financial advice from the bank, and passed on their details during meetings with an adviser. The consultations included filling out questionnaires – or ‘psychometric tests’ – which revealed their attitude to risk. That information could be exploited to persuade victims to buy into questionable investments.

One could call them, the “Glengarry leads”, and an example of one is shown below:

But while Barclays collecting detailed data about its clients is perfectly normal, what it did next is criminal:

The whistleblower first became aware of the Barclays leads in September when the boss of the brokerage firm asked him to sell them to other traders. ‘The obvious question I asked was, “These are fantastic leads, why are you not using them yourself?”

 

‘He replied, “We have – sell it as secondary data.” He had got all he could out of them. New, they were worth £50 per file. He asked us to sell for £8.’

 

The whistleblower showed the leads to a select group of brokers ‘who thought they were amazing’, but eventually decided not to sell.

 

‘My conscience got the better of me. It was all just so wrong,’ he said. ‘I wasn’t a broker myself at this stage, but I had a business link to the firm.’

 

Between December 2012 and September 2013 the firm persuaded victims to buy rare earth metals that did not exist, it is claimed. The whistleblower estimates up to 1,000 people could have been ‘scammed’.

Then the party was over as quickly as it started:

When the investors began to suspect they were being fleeced he said the boss chose to ‘shut the trading floor’.

 

His orders were to get rid of the evidence, to show that we were never there. We bleached the desks so his DNA was not in the office. We destroyed his laptop and 15 bags of paperwork. We wiped the computers. During this fiasco he asked me, “Have you got the Barclays leads?” I said, “No, I haven’t, they must have been destroyed”. ‘But I kept them because I thought the whole thing had gone too far. I want to stop it now, to tell people what was happening.’

Alas, the burning down of the crime scene was not enough, and now that Barclays has been exposed, the damage control begins:

Barclays said in a statement: ‘We are grateful to The Mail on Sunday for bringing this to our attention and we contacted the Information Commissioner and other regulators on Friday as soon as we were made aware. ‘Our initial investigations suggest this is isolated to customers linked to our Barclays Financial Planning business, which we ceased  in 2011.

 

‘We will take all necessary steps to contact and advise those customers as soon as possible so that they can also ensure the safety of their personal data. ‘Protecting customers’ data is a top priority and we take this issue extremely seriously. This appears to be criminal action and we will co-operate with the authorities on pursuing the perpetrator.

 

‘We would like to reassure all of our customers  that we have taken every practical measure to ensure that personal and financial details remain as safe and secure as possible.’ The Mail on Sunday has arranged to pass on the data to the Information Commissioner’s Office. A spokesman said: ‘We’ll be working with The Mail on Sunday this week as well as working with the police.’

That’s not all: we also learn that the legacy of the Wolf of Wall Street is alive and well. So alive in fact, he has been in ongoing consultations on how to cold call clients about which the sellers already knew everything in advance:

Brokerages wa
nt to hire people who are money-oriented, articulate and who speak the Queen’s English. Their ideal is the young, hungry white guy. They want the most aggressive person, very manipulative and bullish, almost like a New York broker in the 1980s.

In the first interview they would ask: ‘Do you **** whores and sniff coke? Do not come and work here if you don’t.’ They might even ask the interviewee to sing a song. They want to see if they can bend them over a barrel and get them to do what they want. Out of 10,000 brokers, 9,000 will be earning below the minimum wage. The majority will never succeed. The successful ones do not have a moral compass.

 

Most people drop out after a couple of years because they burn out but I know old school brokers who’ve done it since the 1980s. 

 

We got trained by Jordan Belfort, the real-life Wolf of Wall Street. It cost £38,000 for an hour’s conference call with him from New York. Three different firms took part and there were 40 brokers in the room, sitting around a phone.

 

He’s big on ‘rapport building’. He shows how to apply pressure in the right places – how to manipulate people in a controlled way. In all cases, brokers try to find the person’s motive for investing. When trust is established  it’s very easy to make the ale or ‘load’ a client with a commodity. Loaders are a breed of broker and some can earn 40 per cent a deal on just the commission.

A lot of contracts between broker and investor include ‘exit confirmation’ – the date when the return on investment is expected. But in many cases those clauses are a lie. A month or two before the exit strategy is due, the firm winds up and disappears.

 

The owners – criminals in sharp suits – will set up shop, trade for a bit, then the company will close, only for the brokers to open another one.

 

The next day they ring the same clients, but with different voices on the end of the phone. You might use a different name – nobody uses their real name. Many on the Barclays list were born in the 1930s. Old people are perfect targets because they are more trusting and they haven’t got long left. You hope they die before your exit strategy comes up.

Hopefully this anecdote serves to illustrate the link between insolvent but bailed out and cash-strapped banks, boiler rooms, and criminal salespeople.

Finally, it goes without saying, that if this is happening in the UK it most certainly taking place in the US as well. And as a follow up – while the general public has every right to be concerned about how its private data is being abused by public spy entities such as the NSA, perhaps it is time to inquire just how it may be abused not only by private banks such as Barclays, but by all those private corporations who interact daily with the countless users who share their data on the Internet assuming that it won’t be used in a criminal fashion by virtually everyone.


    



via Zero Hedge http://ift.tt/1giHZn7 Tyler Durden

Week Ahead: Central Banks in Focus

We suspect that the move in the capital markets that has dominated the first several weeks of the new year has been completed and a new phase has begun.   This is positive for equity markets in general.  Core bond yields rise.  We suspect the pressure on emerging markets will lessen.  This is likely to coincide with a pullback in the yen after a 3% gain since the start of the year.

 

There are no policy meetings for the major central banks this week, but they are the focus for investors in the week ahead.  

 

The new Chair of the Federal Reserve has not spoken about policy for three months.   Her silence will be broken with congressional testimony this week.    Yellen’s testimony may prove more interesting from a stylistic point of view rather than substance.   She has helped shape Fed policy and was on board with the tapering and forward guidance.  She cannot be expected to deviate from the Fed’s general economic assessment or the path Bernanke outlined in December.    The key message will be one of continuity not innovation.  

 

The wing of the Fed that was associated with the doves favors continued measured slowing of the long-term asset purchases.  The wing that is associated with the hawks advocates quickening the pace.  Yellen will resist the rearguard action of the hawks and she will likely have the macro economic developments on her side. 

 

That is to say that after accelerating in H2, the US economic activity is likely to moderating.   Three main forces are at work:  inventory-run down, inclement weather, and the rise in interest rates.    Last week’s trade figures warn that Q4 GDP is likely to be revised lower.  This week’s main economic report is January retail sales.   We already know that auto sales and chain store sales were softer. 

 

The Bank of England’s quarterly inflation report takes on extra significance this week.  Governor Carney has indicated that it will update the forward guidance that had not only listed certain knock-out considerations, but also identified the 7% unemployment level as a threshold for a review of monetary policy.   The media have been particularly hard on Carney, and many observers have claimed he is abandoning forward guidance (FG).  This does not ring true and seems to purposefully distorting FG. 

 

Yet, Carney and the BOE are not blameless.  Recall that the type of forward guidance Carney had adopted at the Bank of Canada was date-specific.  He had anticipated excess capacity (or output gap) would be closed a few quarters out and that the removal of accommodation would be necessary.    At the BOE, he anchored the forward guidance to data as did the Federal Reserve.  Both specifically cited the unemployment rate.    This is a mistake because the unemployment rate is regarded as a lagging indicator, has little to do with the overall economy, and more importantly, with inflation.   

 

Regardless of the unemployment rate, the labor market cannot be considered tight if wage growth remains weak.   Given its mandate, the Federal Reserve has a better justification for using the unemployment rate as a threshold.   The Fed has repeatedly signaled that rates will remain low until well after the unemployment rate falls below 6.5%.  

 

It is simply naïve to think that Carney will jettison forward guidance.  Central banks have long provided insight into their intentions.  Rarely has there been a pre-commitment, but there has often been guidance.  This guidance is all the more important in the current context as central banks want to assure households, investors and businesses are confident that officials will not pull away the punch bowl prematurely.  

 

The German Constitutional Court ruling before the weekend will keep the ECB in focus. Essentially, the Court indicated (in a 6-2 vote) that although it appears that the ECB’s Outright Market Transaction (OMT) scheme overreached its authority, it referred the judgment for the first time to the European Court of Justice.  

 

The euro initially wobbled on the decision as many observers feared that the stability that the OMT pledge brought the EMU would be dashed.  The kind of conditions that the court suggested might be necessary to bring it into accord with its mandate would gut OMT and severely undermine Draghi’s pledge in July 2012 to do whatever is necessary.   The German court suggested to be legitimate, the program should not reduce a country’s debt, should be limited in scale and should not impact prices.  This is what most of the immediate analysis focused on.  

 

While offering its opinion, the German Constitutional Court recognized that it lacked the authority to judge the European Central Bank.  Only the European Court of Justice has the standing to rule whether the ECB had violated its mandate and if OMT was tantamount to monetizing national debt, which is expressly forbidden.   This is very important and did not seem fully appreciated by much of the near instant analysis.  

 

The European Union operates on the basis that treaties are primary law and is given precedence over national law.  By referring the case to the European Court of Justice, the German Constitutional Court formally recognized this principle.  The German court recognized its own limitations, and in so doing will, arguably, strengthen the supra-national effort.  

 

Under the normal timetable, the European Court of Justice could take 18 months to issue its ruling, though under fast-track provisions, a decision could be made this year.   The ECB and notably the German finance minister, have argued that OMT is not tantamount to monetizing debt and is therefore within the ECB’s remit.    Draghi repeated this assessment less than 24 hours before the German court issued its finding.  

 

The German Court is expected to make its ruling on whether OMT violates the German constitution on March 18.   This will become an important date for the striking of euro options and forwards.  As OMT has not been activated, and most likely will not by then, the European Court of Justice is unlikely to issue its preliminary ruling, the German court may yet provide its more typical,”yes, but” formulation that allows greater integration provided German parliament retains an important role.  

 

The German Constitutional Court’s raison d’etre is to protect the German sovereignty from encroachment.  The European Court of Justice is headquartered in Luxembourg and its purpose is to interpret EU law and ensure uniform application.   Many observers suspect that the European Court of Justice, which has one judge per EU member, will be considerably more sympathetic to OMT than the German Constitutional Court. 

 

While it is important for investors to monitor this important legal issue, it unlikely to alter market trends.  Specifically, the euro managed to rally a full cent from the lows seen on the knee-jerk drop spurred by the German court announcement.  

 

The debt of what are regarded as the most likely candidates of OMT (European periphery) still rallied after the announcement.  Of note the Spanish 2-year yield finished last week at new record lows.  Portugal is seeking to exit its aid program near mid-year.  We suspect some kind of form of a pre-cautionary line of credit is more likely than activating OMT.  We note that Portugal’s 10-year yield finished last week within a couple basis points of 4-year lows, showing no stress from the German court ruling.  

 

Abenomics may be not be helped much, but it avoided a pitfall by the LDP victory weekend electoral contest for governor of Tokyo.  Even without the final results known,  challengers to Yoichi Masuzoe, a former health minister, conceded defeat.  The results were marred the low voter turn out that saw about 1 in 3 eligible voters go to the polls.  

 

Ironically, the 20%+ decline of the yen since the election was called that Abe would go on to win, has not produced a larger external surplus.  This point will be underscored by Monday’s release of December’s balance of payments.  It will likely extend the record deficit posted in November.  

 

The trade deficit itself is likely to be shy of a record.  The key to the record shortfall though is with the investment income balance.  This consists of various payments earned by Japanese investors, like royalties and licensing fees, but especially dividends and coupon payments.  As we have noted there is a large seasonal component here.  Simply put, the investment income balance typically deteriorates in Q4 and improves in Q1.   This suggests that Japan’s balance of payments will likely bottom with the December report on Monday and improve as Q1 data is released.  

 

Lastly, we turn to China.  Talk of a China tapering is likely exaggerated.  Indeed, new yuan loans are expected to have grown more than two-fold in January over December and banks, rather than the shadow banking, likely accounted for the sequential increase in aggregate social financing. Consumer inflation will be reported toward the end of the week, and the consensus expects a 2.4% year-over-year rate, which would be the lowest since last May.  

 

More importantly for the emerging markets, which appeared to stabilize at the end of last week, China will report is January trade figures some time during the week ahead.  Exports and imports are expected to have slowed from December, perhaps distorted by the Lunar New Year, and this will result in a smaller trade surplus.  


    



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