July 2014 – Page 11

Estonia- 0% corporate tax and still kicking ass. Why can’t the US learn from this…?

July 31, 2014
Tallinn, Estonia

In the absurdly best-selling book The 7 Habits of Highly Effective People, author Stephen Covey wrote about abundance vs. scarcity.

With the abundance mindset, people confidently view the world as full of resources and opportunities… that there’s more than enough to share… and that more success is coming soon.

The opposite is the scarcity mindset, where people view everything as scarce and finite. If you’re winning it’s because I’m losing.

The scarcity mindset reinforces that there’s never enough time, never enough money. And since we can never be sure about the future, we have to ration every last possible resource and grab every bit for ourselves.

This ‘scarcity’ mindset pretty much sums up tax policy in most ‘rich’ Western nations.

In the US, tax revenue as a percentage of GDP has been almost exactly 17.7% of GDP since the end of World War II.

It hasn’t mattered how much they’ve raised tax rates; when tax rates go up, overall tax revenue, i.e. the government’s slice of the GDP pie, stays about the same.

For years they’ve been bleeding cash.

Yet rather than say “How can we support abundance? How can we help set the right conditions to make the PIE bigger,” they punish and intimidate everyone.

The Land of the Free is one of the only supposedly civilized nations in the world where you can be criminally convicted and thrown in jail over tax discrepancies.

They maintain one of the LEAST competitive corporate tax rates in the world, and then blame the companies who have a problem paying that much.

They need the money. There’s never enough. So they’re obsessed with bullying citizens for every last penny they can get their hands on.

It’s classic scarcity mentality.

Thousands of miles away, Estonia is one of the few countries that gets it.

Estonia has reduced taxes to a low, flat rate of 21%. And this number has been falling; from 26% in 2004, it hit 21% in 2008 and has remained at this level since.

One major innovation here is that Estonian companies are only taxed when they actually make a distribution.

In other words, a company that reinvests its profits back into the business pays ZERO tax.

Not to mention there are tremendous incentives and financing programs available for startups. So building a business here is definitely a great option.

Plus there’s no estate tax– the Estonian government isn’t looking for its ‘fair share’ when you die. There’s no gift tax or wealth tax either. It’s Paul Krugman’s worst nightmare.

But perhaps most importantly, the ENTIRE tax code itself is just 43 pages, and filing a return can be done online in just minutes.

In contrast, the US tax code could fill entire football stadiums. And tax preparation wastes tremendous resources that could otherwise be put to productive use.

But here’s the incredible thing: Estonian tax revenues, GDP, and standard of living have been rising year after year.

And at roughly 10% of GDP, Estonia has a laughably low debt. In fact, Estonia has the LOWEST general government debt of any country in the EU.

In Estonia they have truly worked to make the pie bigger. It’s an abundance mentality, plain and simple.

Now, let’s pretend for a minute that you’re flat, crazy, dead broke. And there’s a guy down the street who really has his stuff together.

He has a nice house, he’s saved money, he’s conservative, and he’s doing quite well.

Wouldn’t it make sense to learn from this person?

Wouldn’t it make sense to spend a little time checking out what they’ve done right, what they’ve learned, and see how you could apply that to your own life?

Sure it does.

But not if you’re the US government. Or France, Spain, Italy, etc.

Their only approach is to ignore the obvious success of other countries who have figured it out.

Instead their scarcity mentality pushes them to continue confiscating, intimidating, and terrorizing in a desperate, failed attempt to make ends meet.

It’s quite sad. But this is our reality.

from SOVEREIGN MAN http://ift.tt/UNte6m
via IFTTT

Frontrunning: July 31

Moscow fights back after sanctions; battle rages near Ukraine crash site (Reuters)
On Hold: Merkel Gives Putin a Blunt Message (WSJ)
Argentina’s Default Clock Runs Out as Debt Talks Collapse (BBG)
Argentina braces for market reaction to second default in 12 years (Reuters)
Banco Espirito Santo Plunges After Posting 3.6 Billion-Euro Loss (BBG)
GOP Says Lerner Emails Show Bias Against Conservatives (WSJ)
Londoners Cashing in Flee to Suburbs as Home Rally Wanes (BBG)
BNP Paribas Reports Record $5.79 Billion Quarterly Loss (WSJ)
Swiss Banks Send U.S. Client Data Before Cascade of Settlements (BBG)
Putin Sows Doubt Among Stock Bears Burned by 29% Rebound (BBG)
China diners test McDonald’s, Yum says food scare hurts KFC, Pizza Hut sales (Reuters)
Netanyahu vows to complete Gaza tunnels destruction (Reuters)
Employees’ Pay in U.S. Is Smaller Slice of Income Pie (BBG)

Overnight Media Digest

WSJ

* Talks aimed at a last-minute settlement between Argentina and holdout creditors collapsed late Wednesday, and a court-appointed mediator said the country would “imminently” be in default. (http://on.wsj.com/1oNORjb)

* Johnson & Johnson, which already suspended sales of a surgical tool that has been blamed for spreading a dangerous cancer in women, plans to tell doctors world-wide to return any devices now on shelves. (http://on.wsj.com/1uIVJTz)

* Venezuela, strapped for cash at home and staring down costly litigation overseas, is considering a deal for its U.S.-based refinery company Citgo Petroleum Corp as well as a stake in a refinery run with Exxon Mobil Corp, according to a Citgo document and people familiar with the matter. (http://on.wsj.com/WNYhRw)

* The head of Samsung’s mobile division, J.K. Shin, is facing pressure as weakening phone sales propel the company toward a third straight quarter of operating-profit declines. (http://on.wsj.com/1ocTlux)

* Federal Reserve officials delivered a modestly more upbeat assessment of the economy Wednesday amid a second-quarter growth rebound and deepening debate inside the central bank about when to start raising interest rates. (http://on.wsj.com/1s5gG7z)

* A federal judge in New York ordered Bank of America Corp to pay $1.27 billion as a penalty for a case involving Countrywide Financial Corp.’s “Hustle” mortgage program. (http://on.wsj.com/1n4XosC)

* Private-equity firms are increasingly buying companies from each other, a shift driven in part by the relative simplicity of completing such acquisitions. (http://on.wsj.com/1oMWer8)

* Barclays Plc swung to a net profit in the second quarter but is under renewed pressure in the United States after authorities extended a non-prosecution agreement to cover a probe into alleged foreign-exchange manipulation. (http://on.wsj.com/1qpGFnc)

* E.W. Scripps Co and Journal Communications Inc struck a deal to put their newspaper operations into one company and their broadcast assets into another, following in the footsteps of rivals. The companies plan a series of spinoffs and stock-based mergers that would hand Journal Communications’ local-television and radio stations to E.W. Scripps and E.W. Scripps newspapers to Journal Communications. (http://on.wsj.com/UMHigk)

* Puerto Rico’s cash-strapped electric power authority is facing a critical deadline on Thursday to extend or make payments on lines of credit with banks or face a possible restructuring of about $9 billion in total debts. (http://on.wsj.com/1lZg6Cx)

A judge ordered Bank of America to pay $1.3 billion for a “brazen fraud” in which bank staff sold toxic mortgages to government-backed mortgage companies Fannie Mae and Freddie Mac.

Snapchat, an app that lets users send messages that disappear after a few seconds, has been in talks about selling a stake to Chinese internet group Alibaba Group <IPO-BABA.N> as part of a funding round that could value it at more than $10 billion, according to people familiar with the discussions.

AMC Networks is in exclusive talks to buy a near-50 percent stake in the BBC’s flagship BBC America channel, according to people familiar with the situation.

Jean-Claude Juncker, the incoming European Commission president, is considering creating an EU financial services directorate charged with regulating the London financial scene and ensuring stability in the region.

The Glazer family is planning to sell about 5 percent of its stake in Manchester United, taking advantage of the football club’s rising share price after its 750 million pound ($1.27 billion) kit supply deal with Adidas. The sale will leave the Glazer family with about 83 percent of the club in its hands.

NYT

* Argentina failed to make payments on its government bond, and a court-appointed mediator said that it would “imminently be in default.” (http://nyti.ms/1lZn9es)

* Energy companies executives are now acknowledging that the escalating tensions could sharply hurt companies with major investments in Russia. (http://nyti.ms/1tvYcPH)

* Bitcoin has found another taker. On Wednesday, the Wikimedia Foundation, the nonprofit organization that operates Wikipedia, announced that it would allow people to make donations using bitcoin, becoming the latest adopter of the virtual currency as a payment option. (http://nyti.ms/1uJdsKk)

* In an escalation of the confrontation between the United States attorney in Manhattan, Preet Bharara, and Andrew Cuomo over the governor’s cancellation of his own anti-corruption commission, Bharara has threatened to investigate the Cuomo administration for possible obstruction of justice or witness tampering. (http://nyti.ms/1xCDgUJ)

* Nordstrom plans to announce on Thursday that it has agreed to purchase Trunk Club, a five-year old website that sells about 100 brands of men’s apparel, for an undisclosed amount. It is the latest sign that men are not the only ones taking their sartorial habits seriously. (http://nyti.ms/1oOii4G)

* Industry trade groups quickly signaled their intention to ask the federal courts to overturn a ruling that holds McDonald’s liable for the actions of its franchisees. (http://nyti.ms/1tw0qi0)

* Bank of America and federal prosecutors have accelerated their negotiations to resolve an investigation into the bank’s sale of toxic mortgage securities before the financial crisis. (http://nyti.ms/1s5U0mB)

* AMC Networks, the home of AMC, SundanceTV and IFC channels, is in talks to acquire close to a 50 percent stake in BBC America, the United States television network owned by the commercial arm of the BBC, according to people briefed on the discussions. (http://nyti.ms/WOam9i)

* When Snapchat spurned takeover interest from the likes of Facebook and Google, investors scoffed at the audacity of the photo messaging service. But the start-up may have the last laugh. Snapchat has held talks to sell a stake to the Alibaba Group <IPO-BABA.N>, the Chinese Internet giant, people briefed on the matter said on Wednesday. (http://nyti.ms/1zxRYiG)

Canada

THE GLOBE AND MAIL

* Communications Security Establishment Canada intercepts citizens’ private messages without judicial warrants, in its fight against Chinese espionage and other cyberthreats, a document obtained by the paper showed. The 22-page “Operational Procedures for Cyber Defence” speaks about how the electronic-intelligence agency can log, store and study volumes of e-communications that touch government computer networks – including “private communications” of Canadians not themselves thought to be hackers.

Minster of National Defence Rob Nicholson, who approves such surveillance and is provided with statistics about its risks, is the only outsider to know full details about the tradeoffs. (bit.ly/1k8SW1d)

* The Supreme Court of Canada will release its decision Thursday on whether confessions elicited from so-called Mr Big police sting operations can be used in court after the technique helped convict a Newfoundland man of killing his two daughters. (bit.ly/1qMNBzE)

In the business section:

* Barrick Gold Corp took a $500 million charge on its Saudi Arabian copper project and appointed two more independent directors, including a former Goldman Sachs Group Inc banker who used to work closely with the company’s new chairman John Thornton. (bit.ly/1psOVnr)

NATIONAL POST

* They sit in the Red Chamber for an average of about 70 days a year. But Canada’s senators don’t seem all that keen to have the public see what goes on in there. In a tentative baby step toward transparency, the Senate is considering the installation of video cameras in its chamber, but the two-month pilot project would only see the footage directed to an internal feed. (bit.ly/1s6iMUP)

* More than two-thirds of Canadians want marijuana laws softened, says an opinion poll conducted for the federal government. And while a small majority believes companies should not be permitted to sell marijuana just as they sell alcohol and cigarettes, it’s clear many people have no problem with the proposition. (bit.ly/1rSEYDf)

FINANCIAL POST

* The revelation that accounting issues will force Penn West Petroleum Ltd to restate more than four years worth of financial results isn’t the only thing raising the eyebrows of corporate governance experts. Among the biggest concerns is why Penn West’s own audit committee is conducting the internal review of the firm’s accounting practices. (bit.ly/UCWtsH)

* A new poll shows that while Albertans are rapidly ramping up household debt, Ontarians are paying it down. The Bank of Montreal report says average household debt in Alberta is C$124,838, almost double that of average Ontario household debt which shrunk over the past year. (bit.ly/Xj4CEx)

China

SECURITIES TIMES

China’s Insurance Regulatory Commission has issued guidance allowing insurers to invest in asset-backed securities.

21ST CENTURY HERALD

The first test for a recently-announced scheme that allows Hong Kong and mainland investors to buy stocks in each other’s market will take place on Aug. 11.

CHINA DAILY

China’s increasing number of flight delays has driven brisk sales of flight-delay insurance policies in the past two weeks, especially on routes in eastern and central parts of China, travel agencies said.

Britain

The Times

FOR BANKERS, CLAWBACK MEANS A SEVEN-YEAR HITCH

Banks and building societies face a bill of 260 million pounds ($439.63 million) to put in place strict new rules that will overhaul the way lenders and regulators oversee finance professionals and will allow the clawback of bonuses up to seven years after they are awarded. (http://thetim.es/Xh8YMm)

ENERGY FIRMS DOUBLE PROFITS IN JUST 12 MONTHS

Energy firms are set to double their profits in the space of 12 months after refusing to pass on to customers huge falls in the cost of wholesale oil and gas. (http://thetim.es/1lYwNxX)

The Guardian

BARCLAYS’ PPI CLAIMS RISE BY 900 MLN STG AS PROFITS FALL

The cost of the payment protection insurance scandal has soared again after Barclays set aside another 900 million pounds to cover the costs of compensating customers mis-sold the insurance product. (http://bit.ly/1nKltdt)

CENTRICA IN TALKS WITH GOVERNMENT OVER IMPACT OF RUSSIA SANCTIONS

Britain’s largest domestic energy supplier, Centrica , is in talks with the government as fears mount that a worsening stand-off with Russia could undermine an important power deal. (http://bit.ly/1rH55cQ)

HSBC SHUTS ACCOUNTS OF MUSLIM ORGANISATIONS, INCLUDING FINSBURY PARK MOSQUE

Three Muslim organisations, including the Finsbury Park mosque, are demanding answers from HSBC after being told by the bank that their accounts were being shut down. (http://bit.ly/1zx8VJY)

The Telegraph

U.S. CABLE GIANT AMC ‘IN TALKS’ TO TAKE 50 PERCENT STAKE IN BBC AMERICA

AMC Entertainment, the U.S. cable TV broadcaster home to such hits as ‘The Walking Dead’ and ‘Mad Men’, is in talks to buy a stake of around 50 percent in BBC America, according to reports. (http://bit.ly/1k8asmd)

STRONG POUND PLAYS HAVOC WITH UK PLC

The damaging impact the strong pound is having on UK exporters and companies with sizeable operations abroad was laid bare on Wednesday, as British American Tobacco, National Express, ITV and Barclays all warned that the appreciation of sterling had put a dent in profits and revenues. (http://bit.ly/WNMIcT)

Sky News

CO-OP REVAMP GOES ON WITH SECURITY ARM SALE

The restructuring of the Co-operative Group is poised to continue with the sale of its security arm in a deal that will raise money to help shore up its troubled finances. (http://bit.ly/1pGodFi)

Fly On The Wall Pre-Market Buzz

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Jobless claims for week of July 26 at 8:30–consensus 305K
Chicago PMI business barometer index for July at 9:45–consensus 63.2

ANALYST RESEARCH

Upgrades

AXIS Capital (AXS) upgraded to Market Perform from Underperform at BMO Capital
Alexandria Real Estate (ARE) upgraded to Outperform from Sector Perform at RBC Capital
AllianceBernstein (AB) upgraded to Buy from Neutral at Citigroup
BOK Financial (BOKF) upgraded to Market Perform from Underperform at BMO Capital
Booz Allen (BAH) upgraded to Outperform from Neutral at Credit Suisse
Cliffs Natural (CLF) upgraded to Market Perform from Underperform at Bernstein
Ecolab (ECL) upgraded to Overweight from Neutral at JPMorgan
Huntington Bancshares (HBAN) upgraded to Outperform from Sector Perform at RBC Capital
Lumber Liquidators (LL) upgraded to Market Perform at Raymond James
Open Text (OTEX) upgraded to Outperform from Neutral at Credit Suisse
Praxair (PX) upgraded to Overweight from Equal Weight at First Analysis
Raymond James (RJF) upgraded to Positive from Neutral at Susquehanna
Sallie Mae (SLM) upgraded to Buy from Neutral at Janney Capital
SodaStream (SODA) upgraded to Equal Weight from Underweight at Barclays

Downgrades

EZCORP (EZPW) downgraded to Market Perform from Outperform at Wells Fargo
Eli Lilly (LLY) downgraded to Neutral from Buy at Citigroup
Franklin Resources (BEN) downgraded to Neutral from Buy at Citigroup
LPL Financial (LPLA) downgraded to Neutral from Buy at Citigroup
Mobile Mini (MINI) downgraded to Neutral from Outperform at RW Baird
On Assignment (ASGN) downgraded to Neutral from Outperform at RW Baird
Quanex (NX) downgraded to Hold from Buy at BB&T
Rayonier Advanced downgraded to Sector Perform at RBC Capital
Sagent Pharmaceuticals (SGNT) downgraded to Hold from Buy at Needham
TTM Technologies (TTMI) downgraded to Neutral from Overweight at JPMorgan
Tetra Tech (TTEK) downgraded to Neutral from Outperform at RW Baird
UPS (UPS) downgraded to Neutral from Overweight at Atlantic Equities
Unilever (UN) downgraded to Neutral from Buy at Goldman
United Microelectronics (UMC) downgraded to Sell from Neutral at Citigroup
United Microelectronics (UMC) downgraded to Underweight from Neutral at JPMorgan
Whole Foods (WFM) downgraded to Neutral from Buy at UBS
Whole Foods (WFM) downgraded to Neutral from Overweight at JPMorgan
Yelp (YELP) downgraded to Market Perform from Outperform at Raymond James

Initiations

Enphase Energy (ENPH) initiated with an Outperform at Imperial Capital
lululemon (LULU) initiated with a Positive at Susquehanna

COMPANY NEWS

Tesla (TSLA), Panasonic (PCRFY) sign agreement for construction of U.S. Gigafactory
Scripps (SSP), Journal (JRN) merging broadcast operations, to spin off newspapers
Yum! Brands (YUM) said that OSI had a “significant, negative impact” to its sales in China
Endurance Specialty (ENH) terminated its offer to acquire Aspen Insurance (AHL)
Marathon Petroleum (MPC) announced an additional $2B stock buyback program
Tesoro (TSO) announced a new $1B share repurchase plan and raised its quarterly dividend 20% to 30c from 25c per share
Whole Foods (WFM) announced a new $1B share repurchase plan
RealNetworks (RNWK) named Rob Glaser as permanent CEO

EARNINGS

Companies that beat consensus earnings expectations last night and today include:

Yelp (YELP), Whole Foods (WFM), Iron Mountain (IRM), NiSource (NI), Care.com (CRCM), Amerseco (AMRC), MEDNAX (MD), State Auto Financial (STFC), Quanta Services (PWR), Generac (GNRC), Cigna (CI), ACI Worldwide (ACIW), Ctrip.com (CTRP), Swift Energy (SFY), American Railcar (ARII), Blackbaud (BLKB), LivePerson (LPSN), Cleco (CNL), First Bancorp (fbnc), Fox Chase Bancorp (FXCB), C&J Energy (CJES), Kirby (KEX), Churchill Downs (CHDN), Noble Corp. (NE), Amerisafe (AMSF), SciQuest (SQI), Selective Insurance (SIGI), Atwood Oceanics (ATW), General Cable (BGC), eHealth (EHTH), Boston Beer (SAM), Intersil (ISIL), Intrepid Potash (IPI), Entropic (ENTR), Superior Energy (SPN), Curtiss-Wright (CW), Newport (NEWP), Albemarle (ALB), Endologix (ELGX), Halcon Resources (HK), Vistaprint (VPRT), Moelis (MC), Lincoln National (LNC), Digital River (DRIV), LifeLock (LOCK), Glu Mobile (GLUU), Anika Therapeutics (ANIK), Weight Watchers (WTW), FormFactor (FORM), Veeco (VECO), Molina Healthcare (MOH), Con-way (CNW), NCI, Inc. (NCIT), Ruckus Wireless (RKUS), Fidelity National (FNF), Western Digital (WDC), Lam Research (LRCX), FEI Company (FEIC), MedAssets (MDAS), Cavium (CAVM), Shutterfly (SFLY), Unum Group (UNM), BioMarin (BMRN), CTPartners (CTP), Support.com (SPRT), Steiner Leisure (STNR), Cardtronics (CATM), Cytokinetics (CYTK), Open Text (OTEX), American Capital Mortgage (MTGE), Allstate (ALL), Hologic (HOLX), Rovi (ROVI), Fortune Brands (FBHS), Whiting Petroleum (WLL), AMC Entertainment (AMC), QuickLogic (QUIK), Akamai (AKAM), Forrester (FORR), Century Aluminum (CENX)

Companies that missed consensus earnings expectations include:

Kraft Foods (KRFT), L-3 Communications (LLL), Midcoast Energy (MEP), Xcel Energy (XEL), Acorda Therapeutics (ACOR), Embraer (ERJ), Chart Industries (GTLS), Time Warner Cable (TWC), Enterprise Products (EPD), Suncor (SU), Methanex (MEOH), Buenaventura (BVN), SJW Corp. (SJW), Triumph Group (TGI), Furmanite (FRM), Kraton Performance (KRA), Bennett Environmental (BEL), Murphy Oil (MUR), Allegion (ALLE), Haverty Furniture (HVT), Martin Midstream Partners (MMLP), Tesoro Logistics (TLLP), Manitowoc (MTW), Luxfer (LXFR), Tenaris (TS), Smith Micro (SMSI), Kinross Gold (KGC), Barrick Gold (ABX), FMC Corporation (FMC), Stamps.com (STMP), Tesoro (TSO), Legacy Reserves (LGCY), Capstead Mortgage (CMO), Tetra Tech (TTEK), KapStone (KS), Solazyme (SZYM), ManTech (MANT), Williams Partners (WPZ), Hartford Financial (HIG), Penn Virginia (PVA), Macquarie Infrastructure (MIC), Cabot (CBT), Spansion (CODE), A10 Networks (ATEN), Manning & Napier (MN), American Equity (AEL), Regional Management (RM), Coherent (COHR), Roadrunner (RRTS), Town Sports (CLUB), MetLife (MET)

Companies that matched consensus earnings expectations include:

Alamos Gold (AGI), Brookline Bancorp (BRKL), Silicon Image (SIMG), AVG Technologies (AVG), Service Corp. (SCI), TTM Technologies (TTMI), Williams (WMB), Nanometrics (NANO), Hudson Technologies (HDSN), ServiceNow (NOW), TFS Financial (TFSL)

NEWSPAPERS/WEBSITES

Target (TGT) to name PepsiCo’s (PEP) Brian Cornell as new CEO, WSJ reports
Apple (AAPL) said to fire 200 Beats employees after buyout, Bloomberg reports
AMC Networks (AMCX) in talks for stake in BBC America, Bloomberg reports
FCC questions Verizon’s (VZ) plan to manage data speeds for some customers, WSJ reports
NY governor steps in to BNP (BNPQY) agreement for $1B more for state fund, Reuters reports
EU regulators ready challenge to Google (GOOG) mobile software business, Reuters reports
Amgen (AMGN) shares could gain 25%, Barron’s says
Twitter (TWTR) looks pricey, Barron’s says

SYNDICATE

Athlon Energy (ATHL) files to sell 12.5M shares of common stock for holders
Avalanche Biotechnologies (AAVL) 6M share IPO priced at $17.00
Bio Blast Pharma (ORPN) 3.2M share IPO priced at $11.00
Catalent (CTLT) 42.5M share IPO priced at $20.50
Ceragon Networks (CRNT) 21.25M share Secondary priced at $2.00
Endurance Specialty (ENH) requests withdrawal of registration statement
Gevo (GEVO) files automatic common stock, warrant shelf
HealthEquity (HQY) 9.1M share IPO priced at $14.00
Macrocure (MCUR) 5.35M share IPO priced at $10.00
Manchester United (MANU) files to sell 8M Class A Ordinary Shares for holders
Ramco-Gershenson (RPT) files to sell 5.25M common shares of beneficial interest
Synchrony Financial (SYF) 125M share IPO priced at $23.00
Tyson Foods (TSN) 23.81M share Secondary priced at $37.80
Vascular Biogenics (VBLX) 5.4M share IPO priced at $12.00

via Zero Hedge http://ift.tt/1n6kqzi Tyler Durden

Futures Tumble On Espirito Santo Loss, European Deflation, Argentina Default

It has been a deja vu session of that day nearly a month ago when the Banco Espirito Santo (BES) problems were first revealed, sending European stocks and US futures, however briefly, plunging. Since then things have only gotten worse for the insolvent Portuguese megabank, and overnight BES, all three of its holdco now bankrupt, reported an epic loss despite which it will not get a bailout but instead must raise capital on its own. The result has been a record drop in both the bonds (down some 20 points earlier) and the stock (despite a shorting ban instituted last night), which crashed as much as 40% before stabilizing at new all time lows around €0.25, in the process wiping out recent investments by such “smart money” as Baupost, Goldman and DE Shaw. The result is a European financial sector that is struggling in the red, while adding to its pain are some large cap names such as Adidas which also tumbled after issuing a profit warning relating to “developments” in Russia. Then there was European inflation which printed at 0.4%, below the expected 0.5%, and the lowest in pretty much ever, and certainly since the ECB commenced its latest fight with “deflation”, which so far is not going well. The European cherry on top was Greece, whose dead cat bounce is now over, after May retail sales crashed 8.5%, after rising 3.8% in April.

Oh, as for now bankrupt Argentina, don’t cry for it. Something tells us the brand new BRICS bank will be quick to reach out a helping hand to the insolvent country, unless of course the country purchases the holdout bonds behind the scenes and puts the whole affair to bed (although how that will anger the restructured bondholders, or if it will trigger the RUFO clause is anyone’s guess).

Asian equity markets are switching between gains and losses overnight. On the one hand, DM Asian bourses are trading firmer including the SHCOMP and ASX200 while EM indices struggle (HSCEI -0.45%, KOSPI -0.34%). Asian EMFX is trading weaker overall, which is a carryover of the sentiment in LATAM late yesterday. The INR (-0.25%) and MYR (-0.25%) are both weaker on the day. Both the Asian and Australian benchmark IG credit indices are trading unchanged to slightly tighter today, repeating the outperformance of higher grade credit assets over the last 24 hours relative to other risk assets. Asian stocks fall with the Shanghai Composite outperforming and the Sensex underperforming. MSCI Asia Pacific down 0.4% to 148.9. Nikkei 225 down 0.2%, Hang Seng up 0.1%, Kospi down 0.3%, Shanghai Composite up 0.9%, ASX up 0.2%, Sensex down 0.7%. 1 out of 10 sectors rise with financials, health care outperforming and tech, staples underperforming

Stocks in Europe are seen lower across the board, after a number of large-cap stocks reported less than impressive earnings, with the likes of Adidas (-14.05%) also announcing a profit warning, citing developments in Russia/CIS. As a result, consumer discretionary sector underperformed in Europe, with financials also lagging amid the uncertainty surrounding the beleaguered Banco Espirito Santo (-45.25%). In turn, the Portuguese PSI-20 index underperformed its EU peers, down 4.3% last, whereas the DAX is lower by -1.00% after taking out a major 50% Fibonacci from the March lows to June/July highs at 9504.75, with the cash index trading below the 200DMA line. 2 out of 19 Stoxx 600 sectors rise; health care, oil & gas outperform, financial services, banks underperform. 11.3% of Stoxx 600 members gain, 88.5% decline. Eurostoxx 50 -0.9%, FTSE 100 -0.2%, CAC 40 -0.6%, DAX -0.9%, IBEX -1.8%, FTSEMIB -1.5%, SMI -0.6%.

Turning to the day ahead, Euroarea CPI will be a key data point to watch. Consensus is pointing to core inflation of 0.8% y/y and headline inflation of 0.5% y/y which would be unchanged on June’s number. Other European data include German and Italian unemployment. Across the Atlantic, US weekly jobless claims (consensus 300k), the ECI and the Chicago PMI (consensus 63.0) are the key data releases. Finally a number of large caps report earnings today including MasterCard, Time-Warner, ConocoPhillips and Exxon Mobil. If that’s not enough, tomorrow brings us the start of August and the latest payroll number which is arguably even more interesting and important given the data and rate move yesterday.

Market Wrap

S&P 500 futures down 0.7% to 1951.9
Stoxx 600 down 0.9% to 337.4
US 10Yr yield down 1bps to 2.55%
German 10Yr yield down 1bps to 1.16%
MSCI Asia Pacific down 0.4% to 148.9
Gold spot down 0.1% to $1295.5/oz

Bulletin Headline Summary from Bloomberg and RanSquawk

Stocks are lower across the board in Europe, with consumer discretionary sector underperforming after Adidas announced a profit warning and financials also lagging, after Banco Espirito Santo announced that it is to carry out a capital increase.
Lower stocks, month-end and coupon/redemption flows saw Bunds move into positive territory, with PO/GE 10y spread wider by 5bps amid concerns over the Portuguese banking system.
Treasuries gain, paring MTD loss, amid declines in European stocks, weakness in commodities; market focus shifting to tomorrow’s U.S. payrolls report for July, est. +231k with unemployment rate holding at 6.1%.
Euro-area inflation unexpectedly slowed in July to the weakest in almost five years, underscoring the ECB’s concerns that the economy is too feeble to drive price growth
Banco Espirito Santo SA’s stock plunged by the most on record and the bonds slumped after it was ordered to raise capital following a EU3.6b 1H net loss
The “edge is coming off” the U.K. housing market and that may start to affect the wider economy by the end of the year, according to Bank of England Deputy Governor Ben Broadbent
The U.S. might move to limit derivatives trading and short- term loans with Russian companies if sanctions already imposed fail to sway Putin to end support for rebels in eastern Ukraine
With S&P saying Argentina is in default and last-minute plans to remedy the situation falling through, investor focus is turning to whether holders of $29b of bonds will demand immediate repayment
Sierra Leone declared a state of emergency as neighboring Liberia ordered the military to enforce a quarantine on some towns in a bid to contain the spread of the worst Ebola outbreak ever
Former security chief Zhou Yongkang is facing the same political path as his onetime ally Bo Xilai, which leads to the gates of Qincheng prison, a compound north of Beijing that has confined a who’s who of China’s fallen elite
The largest global investment banks face further cost reductions, like the job cuts JPMorgan began this month, after a drop in first-half expenses failed to match a decline in revenue
Sovereign yields mixed, with Germany, U.K. and U.S. lower; Greece and Portugal rise. Euro Stoxx Banks slide 2.8%. Asian stocks mixed, with China higher and Japan lower; European equities, U.S. stock futures decline. WTI crude lower, gold and copper little changed
Focus turns to another round of US earnings, this time by Exxon,
MasterCard, Occidental Petroleum and ConocoPhillips, as well as the
release of the weekly US jobs, Challenger job cuts and Chicago PMI
reports.

US Event Calendar

7:30am: Challenger Job Cuts y/y, July (prior -20.2%)
8:30am: Employment Cost Index, 2Q, est. 0.5% (prior 0.3%)
8:30am: Initial Jobless Claims, July 26, est. 300k (284k); Continuing Claims, July 19, est. 2.492m (prior 2.5m)
9:45am: Chicago Purchasing Manager, July, est. 63 (prior 62.6)
9:45am: Bloomberg Consumer Comfort, July 27 Central Banks
11:00am: Fed to buy $1b-$1.25b notes in 2036-2044 sector

FIXED INCOME

Lower stocks in Europe this morning, together with month-end and coupon/redemption flows saw Bunds recover and gradually move into positive territory. At the same time, the release of lower than expected Eurozone CPI estimate which came in at its lowest level since October 2009, further underpinned expectations of particularly low inflation and saw 2y EU inflation swap rates touch on lowest level since February 2009. Also of note, PO/GE 10y spreads widened by 5bps in reaction to Banco Espirito Santo (-45.25%) announcing that it is to carry out a capital increase. In terms of month-end revisions, Barclays Final Pan Euro Agg Month-end Extension +0.12y vs. Prelim. +0.11y (Prev. month 0.09y, 12m Avg. 0.08y) and Barclays Prelim Sterling Agg Month-end Extension +0.04y (Prev. month 0.03y).

EQUITIES

Month-end buying by a major European central bank meant that EUR outperform GBP, though both pairs remained in the red as the cautious sentiment dominated the price action in early European trade. At the same time, upside price action by Bunds and USTs prompted unfavourable interest rate differential flows and saw USD/JPY move into negative territory

COMMODITIES

Gold has come off its European session lows, yet remains in negative territory after being hit on a good US GDP number yesterday, with the precious metal pausing for breath ahead of the NFP tomorrow. WTI has extended losses after breaking below its 100DMA at USD 100.30 yesterday, amid rising Cushing inventories in the US and reports that Ukraine has stopped combat in the east after a plea from the UN’s Ban.

* * *

DB’s Jim Reid concludes the overnight recap

The bureau of economic statistics made some pretty sizeable rewrites of recent history yesterday in the US GDP report as well as publishing a better Q2 number (4.0% vs 3.0% expected). Q1 14, Q4 13 and Q3 13 GDP were revised up 0.8%, 0.9% and 0.4% respectively. This report was certainly one for the US economy bulls and it did send a few shudders across global markets yesterday showing the sensitivity there is to higher rates and yields especially given generally poor trading liquidity. However just as markets were getting a little nervous, along came Yellen and co to make a point of adding to the FOMC statement that the Fed still “sees significant underutilization of labor resources”. Despite a balanced statement overall with some hawkish elements, a few picked up on this remark as allowing Yellen to remain slow to remove stimulus even as unemployment falls.

Treasury yields moved higher throughout the day but it took the GDP number to really cause rates to back up. The 10yr treasury added 10bp in yield terms shortly after the GDP beat, reaching an intraday high of 2.56%, before the FOMC’s statement provided some brief respite. Indeed, following the FOMC yields initially firmed by around 3bp, but they pared the move into the close and finished near the highs of 2.55%. UST curves bear steepened throughout the day, and this accelerated following the GDP report. A slightly higher than expected Q2 PCE (2.0% vs 1.9%) benefited 10yr breakevens, which added 0.5bp to 2.27%.

There was an interesting reaction from stocks. US equities fell to a low of -0.4% shortly after the GDP print, but recovered all of that loss post-FOMC to be unchanged on the day (S&P500 +0.01%) suggesting that perhaps equities had found the Fed policy statement more dovish than other markets had. Note that the sectoral underperformers yesterday were the high dividend and defensive sectors such as utilities (-1.65%), telcos (-0.6%) and consumer staples (-1.0%). This was offset by cyclicals such as consumer discretionary (+0.55%), financials (+0.44%) and info tech (+0.24%). In the context of the price action in rates and equities, credit seemed to outperform. In Europe, Crossover (246.625bp, -2.5bp) and Main (61.75bp, -0.125bp) closed tighter and CDX IG was basically unchanged. Amid the underperformance of higher yielding assets yesterday, there was further chatter about outflows from US HY. We’ll find out more about outflows later today when the latest weekly outflow numbers are released. At a more micro level, both the SPDR Barclays and iShares iBoxx HY ETFs registered daily outflows yesterday, and both ETFs traded further into negative premium territory against their respective NAVs, according to Bloomberg data. We think the flows out of the US HY should slow down soon unless rates rise. So US HY could have done without yesterday’s move.

Back to GDP, it’s worth highlighting that in real terms the US YoY growth number is now still ‘only’ 2.4% which is not spectacular given the stimulus seen in this cycle. Indeed since the end of 2009 the average YoY growth has been 2% and has struggled to eclipse that rate consistently since. The one question mark over the Q2 2014 release is that inventory build accounted for 40% of the strong number. So will sales and activity justify this over the coming months? Our US economist Joe Lavorgna thinks so. Joe writes that the level of inventories versus demand (i.e., sales) is quite low. In fact, the inventory to sales (I/S) ratio slipped from 3.85 in Q1 to 3.84 in Q2, which is unchanged from year-ago levels. So as ever the US economy is generating much debate.

The backup in US yields and a strengthened USD (dollar index +0.27%) proved to be a tough combination for EM yesterday. Indeed LATAM rates closed between 5-15bp higher on the day and the MSCI EM equity index fell 0.17%. On the currencies side, high yielding currencies all suffered including the MXN (-0.7%), (-0.65%) and ZAR (+0.50%). Further adding to the woes of the EM complex, after the US market close S&P downgraded Argentina to “Selective Default” after the rating agency said that holders of discount bonds did not receive their interest payment. It’s unclear exactly what the next steps are for the Argentine government and its creditors. Economy Minister Axel Kicillof told reporters today in New York that while the government failed to reach a deal with holders of defaulted debt from 2001, many private parties have an interest in resolving the battle. Kicillof also mentioned that it wouldn’t be surprising to see a proposal emerge from a third party, including proposals about waiving the RUFO clause in the debt securities that prohibits the nation from offering a better deal to the holdouts than the one made in debt restructurings (Bloomberg). Also after the US market closed, Banco Espirito Santo reported a 1H14 loss of EUR3.57bn which reflected EUR4.3bn of impairment and provisions. The impairments related to its interest in loans provided to BES Angola, general credit costs, interests in Portugal Telecom and exposure to the Espirito Santo Group. This left BES with a common equity tier 1 ratio of 5% at June 2014, versus a Bank of Portugal mandated minimum of 7%. After saying for a while now that BES has sufficient capital, yesterday the Bank of Portugal said that a capital increase was necessary. The central bank also appointed PwC to form an oversight committee for BES and said that it would suspend some BES officials due to “damaging practices” (Bloomberg).

Asian equity markets are switching between gains and losses overnight. On the one hand, DM Asian bourses are trading firmer including the Nikkei (+0.35%) and ASX200 (+0.17%), while EM indices struggle (HSCEI -0.45%, KOSPI -0.34%). Asian EMFX is trading weaker overall, which is a carryover of the sentiment in LATAM late yesterday. The INR (-0.25%) and MYR (-0.25%) are both weaker on the day. Both the Asian and Australian benchmark IG credit indices are trading unchanged to slightly tighter today, repeating the outperformance of higher grade credit assets over the last 24 hours relative to other risk assets.

If that’s not enough, tomorrow brings us the start of August and the latest payroll number which is arguably even more interesting and important given the data and rate move yesterday.

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Andrew Napolitano: Is President Obama Incompetent or Lawless?

The president has discretion to adapt law enforcement to the
needs of the times and to his reading of the wishes of the American
people. Yet that discretion has a serious and mandatory guiding
light—namely, that the president will do so faithfully.

But today, President Obama has taken the concept of discretion
and so distorted it, writes Andrew Napolitano, that his job as
chief law enforcer has become one of incompetent madness or chief
lawbreaker. Time after time, in areas as disparate as civil
liberties, immigration, foreign affairs, and health care, the
president has demonstrated a propensity for rejecting his oath and
doing damage to our fabric of liberty that cannot easily be undone
by a successor.

View this article.

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Brickbat: It Takes a Thief

Former Independence, Kansas,
police chief Kenneth Parker entered Alford pleas to perjury,
official misconduct, misuse of public funds and theft
of property valued at more than $25,000. An Alford plea
acknowledges there is enough evidence for the defendant to be
convicted of the crime. Parker stole ammunition, bottled water,
camping equipment, cots, firearms, food, generators, cash and other
property from the city while serving as chief.

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A Personal Anecdote About Taking a Cab Ride That Illustrates Why Municipal Hostility Toward Uber is Silly

uh i think i'll uber instead thanks I got back to my house in
Philadelphia a few minutes ago after spending the last few days at
the Reason offices in Washington, D.C. I knew I was going to get
home late, my train wasn’t scheduled to arrive until after
midnight, but not quite this late. What happened? My cab driver
missed our exit on the highway. I figured this out after he asked
if he missed the exit and I looked up at the road and realized yes
he had. Then he pulled over and asked me to enter the address onto
his phone GPS. When he got off at the right exit he didn’t know
which direction to go, and he made a wrong turn a little later when
I wasn’t paying attention again. All in all the ride took twice as
long as it should have. Why did I take a cab? Philadelphia doesn’t
allow Uber X. Since I was at a train station, where cabs are
plentiful, I didn’t see the need to order a black car via Uber,
which would cost maybe twice as much.

If the argument by taxi commissions the country over is that
cities should ban Uber because it’s not as safe and reliable as
licensed cabs, this kind of experience—which is hardly unique—is a
powerful counterexample. I had a licensed cabbie but I might as
well have been hitchhiking. Neither the city of Phildelphia nor any
other city government ought to be limiting my choices based on what
they (lubricated by taxi industry lobby money) believe is best. As
an adult I can make my own decision. It’s time to stop pretending
taxi licensing regimes do anything other than raise revenue for
municipal governments and protect established monopolies.

Check out Reason TV on the battle over Uber in Washington, D.C.,
the city where I first decided I would use Uber after getting
a cab ride to the train station last time I was there and ending up
missing the last train headed north. The cab driver’s card
machine broke and he accused me of breaking it. Watch Reason TV on
Uber in D.C. below:

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Peter Schiff And Doug Casey On The "Real" State Of The Economy

Submitted by Nick Giambruno of Doug Casey's International Man blog,

One of my favorite podcasts to listen to is The Peter Schiff Show (www.SchiffRadio.com).

Peter always does an excellent job of dissecting the latest economic news and cutting through the smoke and mirrors of government statistics.

Recently he had Doug Casey on his radio show to discuss what’s really happening with the economy. And it’s nothing close to what the talking heads in the financial media would have you believe.

I’m happy to bring this fascinating discussion to International Man readers. I think you’ll not only enjoy it, but you’ll also learn something too.

Until next time,

Nick Giambruno, Senior Editor
InternationalMan.com

Peter Schiff: Joining our program now is Doug Casey, and if you don’t know Doug, he is a libertarian economist. He is a bestselling financial author. He’s an international investor, entrepreneur, and founder/chairman of Casey Research. They publish a monthly newsletter, Casey International Speculator, and most recently Doug has produced a 30-minute documentary called Meltdown America, which I watched just yesterday on the Internet for free. I would encourage everybody to watch it. It’s a very entertaining half hour.

Doug, welcome to The Peter Schiff Show.

Doug Casey: Thanks, Peter. It’s my pleasure.

Peter: So in particular about your movie, which I thought was well done, the story that was most compelling to me was the interview with the gentlemen from Zimbabwe who had lived there most of his life. He was prosperous, had a business, and then had the foresight to read the writing on the wall, leave everything behind, and flee to Australia. He warned his friends—who made fun of him—and they then ended up having their property seized.

Doug: Yes, it’s an absolutely true story, of course. I’ve spent a lot of time in Zimbabwe and before that in Rhodesia over the years. I think the first time I went there was in 1976. His story is quite accurate about what happened in Zimbabwe, but it’s happened in a number of places in the world, and it’s going to happen in other places in the future. This is because most people don’t realize that as big as their investment risks are today with many markets being overinflated and so forth, their biggest risks are actually political risks. The biggest danger to you is your own government. In his case it was the Zimbabwe government. I guess most of the people listening now are Americans, and actually the US government is like a predator stalking us on the African plains.

Peter: What really is compelling about the story and what people should really take to heart is the attitude that pervades is that, well, it’s not going to happen here. It can’t happen here. People don’t want to think about that worst-case scenario. They want to assume that things are going to be okay, and if somebody is warning about this potential doomsday, that is the person whom they ridicule, who they say, oh, you’re crazy, that’s never going to happen, and, it happens in places like Zimbabwe. But expand on it, because it’s happening in America.

Doug: Well look, I hate to sound like a Cassandra, a gloomy Gus. I hate to say the sky is falling, and I know you do too. But you’ve got to be realistic. I don’t call it America anymore. I call it the US because although America is a fantastic idea, a wonderful idea, America as a concept is rapidly disappearing from the land area called the United States. So yeah, I hate to sound gloomy, because there are lots of reasons for optimism that we can recount. We have more scientists and engineers alive today now than we’ve had in all previous history put together. So that’s cause for optimism. But there is a lot of cause for real pessimism certainly in the short term, in the next decade or so in the US, and it could get worse from there. So you and I are pretty much on the same page economically, and it makes me a little uncomfortable having to be gloomy, but I have to be. I have to assess the facts.

Peter: Yeah, you can’t ignore the facts. So you don’t like to say that the sky is falling, but then if you see it falling, you don’t want to just pretend that you don’t see what you see because that’s worse. I mean, it’s better to warn about the catastrophes. Maybe your warnings could help put into effect policies that might avert the catastrophe, or if you can’t do that, at least help as many people as possible prepare for it in advance so that they don’t get hit by surprise.

Doug: Yes, although I greatly discount the odds of things changing because policies and governments have a momentum of their own. Imagine a village at the bottom of a valley, and that 100 years ago collectivism and statism started out as a small snowball, and now that snowball has turned into a giant avalanche. Now once it gets to the giant avalanche stage, you can’t stop it. So I’m afraid that the village at the bottom of the valley is going to be smashed, so you’ve got to run for high ground. I don’t think we can stop it at this point. The trend is too entrenched, too far in motion, and the fact that 50% of Americans are reliant upon the government for their income alone is a guarantee of bad things to come.

Peter: Yeah, and Doug, you have been an observer, a critic of this trend that has been ongoing in America for a long time. I mean, it’s not like we suddenly find ourselves on the precipice of disaster. We’ve been on that precipice for a long time. It’s kind of amazing that we haven’t fallen over just yet, but it’s been a long time building. Even my dad was in this camp back in the ‘70s, issuing warnings. But what do you see today that might make you think that this is the endgame? I mean there can’t be another couple of decades where you’re going to be sounding the alarm.

Doug: Yeah, that’s a very interesting point, Peter. When do we reach the actual endgame as opposed to just an accelerating downturn? I would say that it started in 2007. I think that’s the endgame because the Fed’s balance sheet—which is the best indicator of how much actual new money they’re creating—has gone from $500 billion to $4.5 trillion just in the last five years, and they’re still creating more. So they’ve shot all their arrows and when the economy turns down again—and I think it is in process of doing that now—there’s nothing they can do. They have already reduced interest rates to near zero, the Chinese and the Japanese aren’t buying any more government debt, and the official number is $500 billion a year of deficit now, so the Federal Reserve is going to be printing up money wholesale. This is a very scary thing, so yeah, I think we actually have reached the actual edge of the precipice.

Peter: And the amazing thing, too, and y
ou point this out is they’re telling us we’ve been in a recovery for five years. This means statistically we’re also getting close to the next recession. Just by the probability, how long the expansion has been, yet we’ve never begun a recession where rates are still at zero. We’ve never begun a recession while they are still stimulating us from the previous recession. And nobody seems to worry about the outcome of entering a recession from the position that we are in right now.

Doug: And the numbers that they crank out to make everybody feel good are almost as phony as the numbers that the Argentine government cranks out. I live in Argentina most of the year and there, the Cristina Fernández government says well, we only have 10% inflation. But everybody knows that it’s 30 to 40%. And here they say we have 1-2% inflation. I would say that inflation is realistically in the 8-10% range here in the US—and it’s going much higher.

Peter: And that makes a lot more sense to me, given what I’m observing in the actual economy. The critics who argue that that’s impossible, that the people who think that inflation is more than 2-3% percent, they say they must be wrong, because that would mean that the economy has not experienced any legitimate economic growth. And to that I would say, absolutely, it hasn’t. The growth is all a fantasy. It’s all a result of the assumption that there is no inflation, when there really is because what we have is inflation masquerading as economic growth. But the bottom line is the economy is really contracting, that’s why the labor force is shrinking, that’s why we’re using less energy, that’s why the people’s standard of living is going down, and real incomes are falling and job opportunities are disappearing. It’s because we’re in a recession and no one wants to admit it.

Doug: You are absolutely right, and from this point it is going to get much more obvious and get much worse. I just wonder what the social consequences are going to be when the economy goes into a free-fall again, maybe by the end of this year. I think certainly next year. I mean it’s an open question whether people will riot.

Peter: You can already see the frustration. I often joke, if this is the Obama recovery, imagine how bad the recession is going to be. And you know, we’re running these deficits. The president is bragging now that the deficit is finally below $1 trillion, that it might be $600-700 billion, but that’s the deficit in the recovery. If we slip into a legitimate or acknowledged recession, where are the deficits going to go, $1.5 trillion, $2 trillion? And how can we possibly finance that when the world is already saturated with the debt that we’ve issued to stimulate us out of prior recessions?

Also, I’ve got to get to gold and silver, something that I know you’ve been advocating for a while. When it comes to gold and silver, I’ve never seen an environment where you have so many central banks embracing inflation as a goal, that they want more inflation, and they somehow think that it’s going to help the economy; and at the same time you have complete complacency on the part of investors to any of the risks associated with inflation that all these central bankers are promising to create.

Doug: As you are well aware, Peter, it was Lenin who said the best way to destroy a country is to debauch its currency. It’s perverse and idiotic what all the central banks around the world are doing at this point. But some are worse than others. The Europeans are out of control. The Japanese are out of control. The Chinese Central Bank and of course the Fed here in the US are out of control. So that’s one reason why I continue accumulating gold. It’s the only financial asset that’s not simultaneously somebody else’s liability.

Peter: Yeah, and you’ve been a buyer for a long time, a regular buyer and holder of metals. What do you think it’s going to take, though, to convince the skeptics who are so in love with paper and who make fun of the gold bugs for their irrational obsession with this obscure obsolete yellow metal? What do you think it is going to take for the mainstream to start buying into gold and silver, and of course the mining stocks?

Doug: I think it’s going to take a financial and economic collapse. I hate to say it, but I think we are on the edge of something that is much worse than what we had in 2008 and 2009. I look around the world at places where you can put your capital, real estate is overpriced, the stock market is greatly overpriced, the bond market is in a historic bubble, that’s about the best short sale I can think of in the world. So what are you left with? Gold is not a giveaway the way it was in 2001 at $250 an ounce, but it is reasonably priced, so I’m going to continue to buy it. I think there’s going to be a panic into gold, quite frankly.

Peter: You know, Doug, I think it could be just as big a giveaway now. If you look at the cost of production of gold today versus what it was 12 years ago, it costs a lot more to produce gold, and if you look at the amount of money that the central banks have created over the past 12 years and the amount of money that they are threatening to create, I think you could make a case that gold is cheaper now at $1,200 than it was at $300.

Doug: Well, when you look at the cost of mining new gold, there are about 80 million ounces produced every year, and there are perhaps six billion in total existence. Most of the mining companies in the world, the big ones like Barrick and Newmont, it’s not profitable for them to produce gold even at $1,300 an ounce when you consider all the costs of mining. So yes, I wouldn’t argue with you.

Peter: You talk about a bubble in assets like stocks and real estate. The irony of it is, the professional investors who are happily paying ridiculous valuations for stocks, the only bubble that they can identify is the one that doesn’t exist—except in their minds—and that is the bubble that they see in gold.

Doug: Yes, that’s right. The real bubble is in the bond market, and the bond market is much bigger than the stock market, so when the bubble in bonds bursts, it’s going to be very ugly. I’ve got to make a distinction, and I think you will agree with this. I’ve bought gold my whole life. I’ve never sold one ounce because I buy it for safety, for savings, prudence, and insurance. But I’ve also been very involved in gold stocks for many years, and gold stocks are a different animal than gold itself, and I treat them as a speculative vehicle because gold stocks are perhaps the most volatile class of securities in the world. The Vancouver Stock Exchange, which trades about 1,500 supposed gold companies, regularly goes up ten for one and then collapses 95%. As we speak at this time, it’s at a cyclical bottom. So I think it’s an extremely high-potential speculation to get into gold stocks at this time.

(Editor's note: You may want to check out our Casey International Speculator publication which specializes in finding high-potential speculative opportunities in junior mining companies.)

Peter: Yeah, I agree with you. Of the nations that you travel to, which would you consider to be the most stable, maybe the ones that offer the best not only investment opportunity, but opportunity to
live if you want to leave the United States?

Doug: Well, the fact of the matter is that all over the world these governments collude with each other in these clubs they belong to like the United Nations, the IMF, and the OECD, and they are all going in the wrong direction, which is to say more state power, more taxes, and more control. I’ve been to most of the countries in the world, and where I spend most of my time is in Argentina. The people there are used to stupidity from their government and despise their government.

Peter: Well, that’s for sure, Doug. They are prepared for stupidity, unlike Americans who are going to be surprised by it.

Editor’s Note: Be sure to check out www.SchiffRadio.com for more on Peter’s superb radio show. Also, don’t forget to catch our new free documentary Meltdown America, which discusses how to survive an economic collapse with examples from Zimbabwe, Argentina, and Yugoslavia. You won’t want to miss it.

via Zero Hedge http://ift.tt/1zxKUm7 Tyler Durden

Peter Schiff And Doug Casey On The “Real” State Of The Economy

Submitted by Nick Giambruno of Doug Casey's International Man blog,

One of my favorite podcasts to listen to is The Peter Schiff Show (www.SchiffRadio.com).

Peter always does an excellent job of dissecting the latest economic news and cutting through the smoke and mirrors of government statistics.

Recently he had Doug Casey on his radio show to discuss what’s really happening with the economy. And it’s nothing close to what the talking heads in the financial media would have you believe.

I’m happy to bring this fascinating discussion to International Man readers. I think you’ll not only enjoy it, but you’ll also learn something too.

Until next time,

Nick Giambruno, Senior Editor
InternationalMan.com

Doug, welcome to The Peter Schiff Show.

Doug Casey: Thanks, Peter. It’s my pleasure.

Peter: And the amazing thing, too, and you point this out is they’re telling us we’ve been in a recovery for five years. This means statistically we’re also getting close to the next recession. Just by the probability, how long the expansion has been, yet we’ve never begun a recession where rates are still at zero. We’ve never begun a recession while they are still stimulating us from the previous recession. And nobody seems to worry about the outcome of entering a recession from the position that we are in right now.

(Editor's note: You may want to check out our Casey International Speculator publication which specializes in finding high-potential speculative opportunities in junior mining companies.)

Peter: Well, that’s for sure, Doug. They are prepared for stupidity, unlike Americans who are going to be surprised by it.

via Zero Hedge http://ift.tt/1zxKUm7 Tyler Durden

Forget Ebola, Florida Issues "Flesh-Eating Bacteria" Public Health Warning

As Ebola spreads mercilessly across the world, it appears Florida has a problem that sounds just as awful. As CBS reports, Florida health officials are warning beachgoers about a seawater bacterium that can invade cuts and scrapes to cause flesh-eating disease. At least 11 Floridians have contracted Vibrio vulnificus so far this year and two have died, according to the most recent state data.

Not exactly great news for Florida beach season…

Vibrio vulnificus –- a cousin of the bacterium that causes Cholera –- thrives in warm saltwater, according to the U.S. Centers for Disease Control and Prevention. If ingested, it can cause stomach pain, vomiting and diarrhea. But it can also infect open wounds and lead to “skin breakdown and ulceration,” according to the CDC.

“Since it is naturally found in warm marine waters, people with open wounds can be exposed to Vibrio vulnificus through direct contact with seawater,” the Florida Department of Health said in a statement.

…

Florida isn’t the only state to report Vibrio vulnificus infections. Alabama, Louisiana, Texas and Mississippi have also recorded cases, and a 2013 outbreak linked to contaminated shellfish sickened at least 104 people in 13 states, according to the CDC.

ABC News | More ABC News Videos

The CDC’s advice:

Avoid exposing open wounds to warm saltwater, brackish water or to raw shellfish
Wear protective clothing when handling raw shellfish
Cook shellfish thoroughly and avoid food contamination with juices from raw seafood
Eat shellfish promptly after cooking and refrigerate leftovers

via Zero Hedge http://ift.tt/1zxG5cx Tyler Durden

Forget Ebola, Florida Issues “Flesh-Eating Bacteria” Public Health Warning

Not exactly great news for Florida beach season…

Vibrio vulnificus –- a cousin of the bacterium that causes Cholera –- thrives in warm saltwater, according to the U.S. Centers for Disease Control and Prevention. If ingested, it can cause stomach pain, vomiting and diarrhea. But it can also infect open wounds and lead to “skin breakdown and ulceration,” according to the CDC.

“Since it is naturally found in warm marine waters, people with open wounds can be exposed to Vibrio vulnificus through direct contact with seawater,” the Florida Department of Health said in a statement.

…

Florida isn’t the only state to report Vibrio vulnificus infections. Alabama, Louisiana, Texas and Mississippi have also recorded cases, and a 2013 outbreak linked to contaminated shellfish sickened at least 104 people in 13 states, according to the CDC.

ABC News | More ABC News Videos

The CDC’s advice:

Avoid exposing open wounds to warm saltwater, brackish water or to raw shellfish
Wear protective clothing when handling raw shellfish
Cook shellfish thoroughly and avoid food contamination with juices from raw seafood
Eat shellfish promptly after cooking and refrigerate leftovers

via Zero Hedge http://ift.tt/1zxG5cx Tyler Durden