Paper gold in the developed world may trade based on the whims of marginal momentum chasers, and of course, the daytrading mood of the BIS gold and FX trading desk, but when it comes to physical gold and China’s appetite for it, one word explains it best: unstoppable.
After rising to a gross 131 tons imported from Hong Kong alone in August, which was the second highest ever monthly import tally, September saw a modest decline to “only” 116 tons: “only” because it is still 67% more than the amount imported a year earlier.
The gross imports year to date are now over 1,113 tons, 91.3% more than the amount of gold imported through September of 2012.
Netting out exports to Hong Kong, September was virtually unchanged from August, at 109 metric tons vs 110 a month earlier. In other words, September was tied for the third highest net import month in Chinese history.
And yes, we realize that to western thinking buying more when the price is dropping in explicable: ironically even the vast majority of gold bugs are merely interested in a momentum conversion in and out of fiat, thus treating gold as an investable, fiat-denominated asset and not as a currency. China, on the other hand, continues to show that when one’s only intention is to purchase as much gold as possible to preserve wealth and purchasing power and/or unleash the gold standard back on the world (either alone or jointly with Russia and/or Germany), dropping or plunging gold prices are merely the icing on the cake.
via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VCKePCkQ6D0/story01.htm Tyler Durden
As we enter into the two final months of the year, it is also the beginning of the seasonally strong period for the stock market. It has already been a phenomenal year for asset prices as the Federal Reserve's ongoing liquidity programs have seemingly trumped every potential headwind imaginable from Washington scandals, potential invasions, government shutdowns and threats of default. This leaves us with four things to ponder this weekend revolving around a central question: "Does the Fed's Q.E. programs actually work as intended and what are the potential consequences?"
David Einhorn of Greenlight Capital turns his attention to Ben Bernanke with three primary questions:
"We maintain that excessively easy monetary policy is actually thwarting the recovery. But even if there is some trivial short-term benefit to QE, policy makers should be focusing on the longerterm perils of QE that are likely far more important. Here are some questions that come to mind:
How much does QE contribute to the growing inequality of wealth in this country and what are the risks this creates?
How much systemic risk does the Fed create by becoming what Warren Buffett termed 'the greatest hedge fund in history'?
How might the Fed's expanded balance sheet and its failure to even begin to 'normalize' monetary policy four years into the recovery limit its flexibility to deal with the next recession or crisis?"
Nouriel Roubini, a professor at NYU's Stern School of Business, plays tag team with David Einhorn questioning the policies and programs of not only the Federal Reserve but of all global central banks.
"As below-trend GDP growth and high unemployment continue to afflict most advanced economies, their central banks have resorted to increasingly unconventional monetary policy. An alphabet soup of measures has been served up: ZIRP (zero-interest-rate policy); QE (quantitative easing, or purchases of government bonds to reduce long-term rates when short-term policy rates are zero); CE (credit easing, or purchases of private assets aimed at lowering the private sector's cost of capital); and FG (forward guidance, or the commitment to maintain QE or ZIRP until, say, the unemployment rate reaches a certain target). Some have gone as far as proposing NIPR (negative-interest-rate policy).
And yet, through it all, growth rates have remained stubbornly low and unemployment rates unacceptably high, partly because the increase in money supply following QE has not led to credit creation to finance private consumption or investment. Instead, banks have hoarded the increase in the monetary base in the form of idle excess reserves. There is a credit crunch, as banks with insufficient capital do not want to lend to risky borrowers, while slow growth and high levels of household debt have also depressed credit demand.
As a result, all of this excess liquidity is flowing to the financial sector rather than the real economy. Near-zero policy rates encourage "carry trades" – debt-financed investment in higher-yielding risky assets such as longer-term government and private bonds, equities, commodities and currencies of countries with high interest rates. The result has been frothy financial markets that could eventually turn bubbly."
Nouriel's comments touch on a topic that has become much more "mainstream" as of late which questions whether asset prices have once again began to over inflate.
3) 5 Signs The Stock Market Is In A Bubble (CBS Moneywatch)
Larry Fink, CEO of giant money manager BlackRock, clearly thinks the market is frothy.
"We've seen real bubble-like markets again," he said at a panel discussion this week, according to theBloomberg news agency. "We've had a huge increase in the equity markets."
Fink and many others are concerned about the impact of the Federal Reserve's "quantitative easing" program, under which the central bank is buying $85 billion a month in government bonds and mortgage securities in hopes of stimulating economic growth. These assets have vastly expanded the Fed's balance sheet, including recently. Since Sept. 4 alone, those balance sheets have increased 4.3 percent, while the S&P 500 has increased 4.9 percent.
In other words, investors are doubling down to capitalize on the cheap money that continues to flood the market."
The financial markets have long been seen as a gauge of future economic activity. As the stock market rises the economy has also risen. However, that has not been the case over the last several years with the economy stuck at a sub-par rate of growth. Today, with the high degree of correlation between the Fed's balance sheet and the financial markets, it is getting increasingly difficult to make the case that the markets are reflecting anything but themselves.
Fraces Coppola, proprietor of the Coppola Comment, recently discussed the issues behind the Fed's inability to "taper" its current Q.E. program.
"Tapering is removing central bank support of asset prices. Unless not just the US economy but the GLOBAL economy is "on the up" at the time that tap
ering commences, the result of tapering will be a global fall in asset prices. That isn't going to cause hyperinflation, as the Austrian school thinks, but it would cause a global recession.
I'm afraid it is not US fundamentals, but global fundamentals that will determine the Fed's ability to taper. If the Fed tapers when the global economy is already in the doldrums, as it is at the moment, the recessionary rebound to the US economy would be considerable.
Because of the US dollar's pre-eminence (and the pre-eminence of USTs, too – we don't talk about that enough), the Fed is effectively the world's central bank. It is high time that the US accepted that its monetary (and fiscal) policies must be driven by the needs of the global economy, not just the US. The 'exorbitant privilege' is an exorbitant responsibility, too."
QE Doesn't Do Much
As I discussed this past week the reality is that the Fed is now caught in a "liquidity trap." If they begin to remove its liquidity support the markets, and the economy, roll over. The results would like be quite devastating for investors. However, continuing to push asset prices higher also will eventually end badly. It is quite the conundrum for the Federal Reserve and for investors.
While the Federal Reserve continues to push its liquidity programs, the reality is that it does little for economic growth. Nobel Prize winner Eugene Fama discussed with Rick Santelli how the only thing that really benefits from QE programs, other than asset prices, are the "expectations" of benefits on the economy. He explains, in the following CNBC interview, that there is really no reason why QE programs would have much economic impact at all.
How we got here is one thing. Apparently, getting out will be quite another. John Hussman summed this all up well:
"In regard to what is demonstrably true, it can easily be shown that unemployment has a significant inverse relationship with real, after-inflation wage growth. This is the true Phillips Curve, but reflects a simple scarcity relationship between available labor and its real price, but this relationship can't be manipulated to create jobs (see Will the Real Phillips Curve Please Stand Up). It's also true that changes in stock prices are mildly correlated with subsequent reductions in the unemployment rate and higher GDP growth. But the effect sizes are strikingly weak. A 1% increase in stock prices correlates with a transitory increase of only 0.03-0.05% in subsequent GDP, and a decline of only about 0.02% in the unemployment rate. So to use the stock market as a policy instrument, the Fed would have to move the stock market about 70% above fair value just to get 2.8% in transitory GDP growth, and a 1.4% decline in the unemployment rate. Guess what? The Fed has done exactly that. The scale of present financial distortion is enormous, and further distortions rely on the permanent belief that there is actually a mechanistic link between monetary policy and stock prices.
We know very well the mechanisms and actual historical relationships between monetary policy and financial markets, and doubt that any amount of quantitative easing will prevent a market slaughter in any environment where investors find short-term liquidity desirable (QE only “works” to the extent that zero-interest liquidity is treated as an undesirable “hot potato”). Still, the novelty of quantitative easing, and the misattributed belief that monetary policy ended the banking crisis, has created financial distortions where perception-is-reality, at least for now. We believe that the modifier “for now” will prove no more durable than it was during the tech bubble or the housing bubble."
It is something to ponder over the weekend.
via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/z3oFuW4ocXw/story01.htm Tyler Durden
To be a brand name in guerilla street art is to
be in exclusive company. And no one has built a bigger brand
imposing his stencils, spray paintings, and sculptures on the world
than Banksy. Despite the grumbling critiques from both nannyesque
Bloombergians and the kinds of property rights advocates who
sometimes cross swords with the Mayor, James Poulos argues that
unauthorized art invites us to think anew about the place of street
art in our lives.
For over a year we have discussed that in Bernanke’s centrally-planned markets, in which the risk-return formula is now wholly absent the former, the best source of “alpha” (purely in the context of recognizing that the market has become a complete and total joke) for over a year has been going long the most shorted companies. And as we reminded just over a month ago, the most shorted stocks have returned double the broader market in the past year alone. Which is why we were not surprised to see that none other than Goldman yesterday, issued research formalizing none other than going long the most shorted stocks in a piece titled “Investors focused on the results of high short interest stocks.” Since Goldman is legendary for flipping at inflection points, especially with a 1+ year delay after the strategy has been working flawlessly, this probably means that going long the most shorted stocks is no longer a viable source of “alpha.”
From Goldman:
Short interest as a percent of S&P 500 market cap is currently 2.1%, in line with the average over the past year. While the share of market cap held short stayed flat, the short interest ratio (days to cover) has risen steadily since April 2012 as volumes remained low.
This week, investors focused on how stocks with high short interest as a share of market cap are trading this earnings season. Of the top 50 reported S&P 500 companies ranked by short interest, short interest ranges from 6% to 31% of market cap. Short interest for the median S&P 500 stock is 2.1% of float cap.
High short interest stocks reported a similar frequency of earnings beats and misses. Revenue results skewed more positive. 26% of S&P 500 companies beat revenue expectations while 36% of high short interest stocks exceeded consensus expectations by one standard deviation or more.
High short interest stocks were more likely to outperform the market on the next trading day than the typical S&P 500 stock indicating that there may be short covering post-earnings results. 58% of the high short interest names outperformed the S&P 500 one day after reporting results versus 47% for all reported S&P 500 companies.
However, performance of the median high short interest stock is similar to the median S&P 500 stock since the start of earnings season. Since October 4, the median high short interest stock returned 4.6% while median S&P 500 stock returned 4.1%.
Next week, six stocks with over 10% of float share held short are expected to report: Frontier Communications (FTR), IntercontinentalExchange (ICE), Windstream Holdings (WIN), Chesapeake Energy (CHK), Dun & Bradstreet (DNB), and Cablevision Systems (CVC).
Of course, if indeed this means that buying the most shorted stocks is no longer a “sustainable” strategy, that would be ok as it implies one small step toward returning to a normal, credible, non-manipulated market: something that both we and David Einhorn openly lament. Recall from David Einhorn’s Advice On How To Trade This Equity Bubble:
Finally, there are the market participants whose investment process appears to be “bet on whatever has made money most recently.” They’ve noticed that stocks with large short-interest ratios have materially outperformed over the last year and they continue to invest accordingly. When “high short interest” becomes a viable stock-picking strategy and conventional valuation methods no longer apply for many stocks, we can’t help but feel a sense of déjà vu. We never expected to find ourselves in an environment like this again, given the savings that were lost when the internet bubble popped.
Alas, we are smack in the middle of the same bubble once again, and will be until the Chairman keeps playing the musical chairs dance ever faster and faster until finally everyone drops dead.
via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/y0v1kmZLu7w/story01.htm Tyler Durden
Subscribe to the
print or electronic edition of Reason? It’s $15 or less
for year of the nation’s only (and best!) magazine of “Free Minds
and Free Markets.” You’ll get a handsomely designed magazine a
month before the content gets posted en masse to the website.
We already know that administration policymakers
were aware that President Obama’s promise that people who like
their plans can keep them under Obamacare was not true, because
estimates built into early regulations indicated that many plans
would lose their grandfathered, protected status.
A
report in today’s Wall Street Journal indicates that
senior White House advisers were also concerned that the promise
could not be fulfilled, but decided to let the president make it
anyway:
When the question arose, Mr. Obama’s advisers decided that the
assertion was fair, interviews with more than a dozen people
involved in crafting and explaining the president’s health-care
plan show.
But at times, there was second-guessing. At one point, aides
discussed whether Mr. Obama might use more in-depth discussions,
such as media interviews, to explain the nuances of the succinct
line in his stump speeches, a former aide said. Officials worried,
though, that delving into details such as the small number of
people who might lose insurance could be confusing and would
clutter the president’s message.
“You try to talk about health care in broad, intelligible points
that cut through, and you inevitably lose some accuracy when you do
that,” the former official said.
The former official added that in the midst of a hard-fought
political debate “if you like your plan, you can probably keep it”
isn’t a salable point.
So they apparently decided the president should repeatedly make
a promise that wasn’t true, and whose impacts would be felt by
millions of Americans, simply because they hoped that would make it
easier to sell the legislation they wanted to pass.
from Hit & Run http://reason.com/blog/2013/11/02/administration-officials-worried-obamas
via IFTTT
We already know that administration policymakers
were aware that President Obama’s promise that people who like
their plans can keep them under Obamacare was not true, because
estimates built into early regulations indicated that many plans
would lose their grandfathered, protected status.
A
report in today’s Wall Street Journal indicates that
senior White House advisers were also concerned that the promise
could not be fulfilled, but decided to let the president make it
anyway:
When the question arose, Mr. Obama’s advisers decided that the
assertion was fair, interviews with more than a dozen people
involved in crafting and explaining the president’s health-care
plan show.
But at times, there was second-guessing. At one point, aides
discussed whether Mr. Obama might use more in-depth discussions,
such as media interviews, to explain the nuances of the succinct
line in his stump speeches, a former aide said. Officials worried,
though, that delving into details such as the small number of
people who might lose insurance could be confusing and would
clutter the president’s message.
“You try to talk about health care in broad, intelligible points
that cut through, and you inevitably lose some accuracy when you do
that,” the former official said.
The former official added that in the midst of a hard-fought
political debate “if you like your plan, you can probably keep it”
isn’t a salable point.
So they apparently decided the president should repeatedly make
a promise that wasn’t true, and whose impacts would be felt by
millions of Americans, simply because they hoped that would make it
easier to sell the legislation they wanted to pass.
from Hit & Run http://reason.com/blog/2013/11/02/administration-officials-worried-obamas
via IFTTT
Electronic cigarettes are a safe, effective, and fun way to
prevent cancer among smokers of tobacco prodcuts – or people who
want to suck down flavored water vapor that often doesn’t even
include nicotine.
So why are so many people – including folks at the FDA – so
hell-bent on banning or heavily regulating e-cigarettes?
Reason TV’s Tracy Oppenheimer cuts through the fog with the
video documentary, originally released on Tuesday, October 29.
Here’s the original write-up:
Electronic cigarettes are creating a frenzy among politicians,
health experts, and the media. Localbans on
using e-cigarettes indoors are popping up all over the country,
andmany interest
groups are clamoring for top-down FDA regulations, which are
expected to be released in the coming weeks.
“E-Cigarettes currently exist in a complete no-man’s land,” says
Heather Wipfli, associate director for the USC Institute for Global Health.
Skeptics such as Wipfli worry about the lack of long-term data
available because the product is so new.
But according to the Consumer
Advocates for Smoke-Free Alternatives Association’s Greg
Conley, calls for regulation are “a perverse interpretation of the
precautionary principle.” The precautionary principle holds that
until all possible risks are assessed, new technologies shouldn’t
be allowed to move forward.
Conley points to preliminary studies, like this one from
Drexel University, which confirm these smokeless, tobacco-less,
tar-less products are not a cause for concern – or at least not a
cause for the same concerns that accompany traditional cigarettes
and second-hand smoke.
“That [Drexel University] professor concluded that there was
absolutely no worry about risks to bystanders from e-cigarette
vapor,” says Conley.
The ingredients of e-cigarettes certainly have very little in
common with tobacco cigarettes. Nicotine, the only ingredient found
in both products, is mainly used to wean smokers off traditional
cigarettes and is not one of the harm-inducing ingredients
associated with lung cancer in smokers. The other ingredients in
the “e-juice” at the core of e-cigarettes are propylene glycol,
vegetable glycerin, and food flavorings— all of which are used in
other food products.
“All we are doing is steaming up food ingredients to create a
vapor,” says Ed Refuerzo, co-owner of The Vape Studio in West Los
Angeles. The Vape Studio is one of the many boutique
e-cigarette shops popping up that might be significantly affected
or even shut down by both local legislation and FDA
regulations.
Conley says it’s the currently unregulated customizability of
the e-juice that allows these small businesses to thrive. “The
availability of liquids is what is allowing a lot of these small
stores to open and prosper because they are able to mix their own
liquid and sell it to consumers without having to go through a big
manufacturing process,” says Conley.
The higher costs of complying with regulations would most likely
be passed on to consumers, which would impact people who are
looking towards e-cigarettes as an effective way to quit
smoking.
“We’re using technology, and that’s what we do in America, we
use technology to solve really complicated problems,” says Craig
Weiss, president and CEO of NJOY. NJOY
is a leading manufacturer of electronic cigarettes - and a
donor to Reason Foundation, the nonprofit that publishes Reason TV.
Weiss says that despite regulations, the potential of the industry
is only just starting to be realized.
“The electronic industry is growing at quite a dramatic pace.
It’s more than doubled each of the last four or five years,” says
Weiss. “This piece of technology could have such an potential
impact on the world.”
For more on the industry and NJOY, watch this
ReasonTV interview with
Weiss:
from Hit & Run http://reason.com/blog/2013/11/02/the-truth-about-e-cigarettes-safe-effect
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Not even Paul and John would have any clue what the message is or what is going on in this psychedelic, Yellow Subamrine-inspired TV ad slot for Obamacare titled “Fly With Your Own Wings”, part of the Cover Oregon campaign (funded by US taxpayers). Perhaps: enroll in Obamacare, get a lifetime supply of LSD for free…
via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/ZuutNJ1KxP4/story01.htm Tyler Durden
The Virginia governor’s race is being widely
viewed as a bellwether about…something. It pits the ultimate FOB
(does anyone still remember what that means?) Terry McAuliffe (D)
against the conservative Attorney General Ken Cuccinelli (R), with
a suprisingly popular Libertarian candidate, Robert Sarvis, polling
near on in double digits (read Reason’s
inteview with him).
The latest poll, from Emerson College, has McAuliffe at 42
percent, Cuccinelli at 40 percent, and Sarvis at 13 percent. Not
long ago, McAuliffe was winning in a total rout. Other polls show
the race tightening before the election Tuesday, though nothing as
tight as Emerson’s.
RealClearPolitics’ average has McAuliffe up by about 8 points
and Sarvis just over 10 percent (important because cracking double
digits would guarantee the LP ballot access through 2016).
Depending on who you ask, it’s about how awful the GOP is
overall and their foolhardiness in shutting down the federal
government (which is hugely important to the Old Dominion’s
economy). Or it’s about just how disastrous the Obamacare debacle
really is, or how inexperienced and dirty McAuliffe really is; how
brave and stand-up Cuccinelli is (he was a leader in bringing legal
action against Obamacare) or how insanely socially conservative he
is; or how reckless the Libertarian Party is (depending on whom you
ask, the LP is either gifting the election to McAuliffe or showing
the deepening appetite for a third-party to the Dems and Reps.
I suspect that there’s a mix of all of the above at play in the
race. But this is certainly worth hammering home: The notion that a
third-party candidate, in this case a Libertarian, in any way,
shape, or form “costs” a Democrat or Republican an election is a
category error.
This type of argument was made most famously to
explain the outcome of the 2000 election, which was supposedly
thrown to George W. Bush by Green Party candidate Ralph Nader. The
methodology to prove this is simple: You take the spread between
the major party players and then see if a third-party candidate
more votes than that, and blame them. Don’t you see that Nader
obviously tossed the election to Bush, because all of Nader’s
voters would have turned out even if he wasn’t running and would
have voted for Gore…?
There’s a basic logic that seems persuasive, but it glosses over
too many things to really be convincing. In the 2000 election, it
skims over the fact that if Al Gore had been a semi-decent
candidate, he should have won in a rout. He was the VP of a flawed
but effective administration that had overseen a massive and
general increase in wealth (even despite the tech bubble bust at
the very end of the 1990s). This was a guy who had various scandals
of his own on top of Bill Clinton’s and then made the bizarre
decision to show up in orange-face for a
presidential debate and also vaguely physically threaten
Bush at the end of one too. However close – and ultimately
arbitrary – the final vote tally was, Al Gore lost the election
because he was a rotten candidate that voters (and yes, ultimately
the Supreme Court) rejected.
The whole “third party are spoilers” presupposes that the
two major parties have a prior claim on votes and voters, which is
simply wrong. This sort of logic typically get
trotted out by conservatives around election time, when they
suddenly realize that small-L libertarians exist and vote on issues
that go beyond patently unconvincing promises to reduce the size,
scope, and spending of government at any given level. Candidates
such as Cuccinelli, who is by all accounts extremely socially
conservative, are a tough sell to libertarian-minded voters
(45
percent of whom say they identify with the Republican
Party).
Which is another way of saying: If GOP candidates aren’t
convincing to libertarians, don’t blame libertarians. Don’t
conservatives believe in personal responsibility? Take a look at
the man in the mirror then. Blame a party that has never lived up
to its limited government rhetoric or its insistence that
government should leave people alone as much as possible (in
Virginia, this meant among other things, having Republican
legislators vote against a plan to get the government out
of the liquor business. Really).
Libertarians are incredibly consistent in what they
believe and getting their vote is pretty easy: All you have to do
is present a credible plan to cut the role of government across the
board. As leading libertarian Republican Sen. Rand Paul (R-Ky.)
has concisely put it, you have to “embrace liberty in both the
economic and personal spheres.” As I noted in a recent
Time.com column, this isn’t complicated, but it has often
proved a bridge too far for Republicans. That’s their problem and
it may well spell their doom going forward, as libertarian-minded
voters gain numbers and influence:
If the Republicans can’t figure out a way to accommodate broadly
popular, socially tolerant libertarian policies on gay rights, drug
legalization, and more, they will not just lose the race for the
White House in 2016, but quite possibly their status as a major
party.
To be a brand name in guerilla street art is to
It’s been a long
We already know that administration policymakers
The Virginia governor’s race is being widely
This type of argument was made most famously to