Tag: finance

Submitted by Michael Snyder of The American Dream blog,

The average price of USDA choice-grade beef has soared to $5.28 a pound, and the average price of a pound of bacon has skyrocketed to $5.46.  Unfortunately for those that like to eat meat, this is just the beginning of the price increases.  Due to an absolutely crippling drought that won’t let go of the western half of the country, the total size of the U.S. cattle herd has shrunk for seven years in a row, and it is now the smallest that is has been since 1951.  But back in 1951, we had less than half the number of mouths to feed.  And a devastating pig virus that has never been seen in the United States before has already killed up to 6 million pigs in this country and continues to spread like wildfire.  What all of this means is that the supply of meat is going to be tight for the foreseeable future even as demand for meat continues to go up.  This is going to result in much higher prices, and so food is going to put a much larger dent in American family budgets in the months and years to come.

One year ago, the average price of USDA choice-grade beef was $4.91.  Now it is up to $5.28, and the Los Angeles Times says that we should not expect prices to come down “any time soon”…

Come grilling season, expect your sirloin steak to come with a hearty side of sticker shock.

 

Beef prices have reached all-time highs in the U.S. and aren’t expected to come down any time soon.

 

Extreme weather has thinned the nation’s beef cattle herds to levels last seen in 1951, when there were about half as many mouths to feed in America.

 

“We’ve seen strong prices before but nothing this extreme,” said Dennis Smith, a commodities broker for Archer Financial Services in Chicago. “This is really new territory.“

The outlook for pork is even worse.  The price of bacon is 13 percent higher than it was a year ago, and porcine epidemic diarrhea is absolutely devastating the U.S. pig population…

A virus never before seen in the U.S. has killed millions of baby pigs in less than a year, and with little known about how it spreads or how to stop it, it’s threatening pork production and pushing up prices by 10 percent or more.

 

Scientists think porcine epidemic diarrhea, which does not infect humans or other animals, came from China, but they don’t know how it got into the country or spread to 27 states since last May.

It is estimated that up to 6 million pigs may have died already, and it is being projected that U.S. pork production could be down by 7 percent this year.  That would be the largest decline in more than 30 years.

But even if someone brought an end to this pig virus tomorrow, we would still be facing a very serious food crisis in this nation.

The reason for this is the multi-year drought which is crippling farming and ranching in much of the western half of the country.

As you can see from the latest U.S. Drought Monitor update, the drought shows no signs of letting up…

Hopefully this drought will end soon.

But I wouldn’t count on it.

In fact, CBS News recently interviewed one scientist that says that the state of California could potentially be facing “a century-long megadrought“…

Scientist Lynn Ingram, author of “The West without Water: What Past Floods, Droughts, and Other Climatic Clues Tell Us about Tomorrow,” uses sediment cores inside tubes to study the history of drought in the West.

 

“We’ve taken this record back about 3,000 years,” Ingram says.

 

That record shows California is in one of its driest periods since 1580.

 

While a three-to-five-year drought is often thought of as being a long drought, Ingram says history shows they can be much longer.

 

“If we go back several thousand years, we’ve seen that droughts can last over a decade, and in some cases, they can last over a century,” she says.

So what will we do if this drought just keeps going and going and going?

As the article quoted above noted, last century was far wetter than usual.  During that time, we built teeming cities in the desert and we farmed vast areas that are usually bone dry…

Scientists say their research shows the 20th century was one of the wettest centuries in the past 1,300 years. During that time, we built massive dams and rerouted rivers. We used abundant water to build major cities and create a $45 billion agriculture industry in a place that used to be a desert.

So what happens if the western half of the country returns to “normal”?

What will we do then?

Meanwhile, drought is devastating many other very important agricultural areas around the world as well.  For example, the horrible drought in Brazil could soon send the price of coffee through the roof…

Coffee futures prices are up more than 75 percent this year due to a lack of appreciable rain in the coffee growing region of eastern Brazil during January and February, which are critical months for plant development, according to the International Coffee Organization, a London-based trade group.

At this point, 142 Brazilian cities are rationing water, and it wouldn’t just be coffee that would be affected by this drought.  As a recent RT article explained, Brazil is one of the leading exporters in a number of key agricultural categories…

Over 140 Brazilian cities have been pushed to ration water during the worst drought on record, according to a survey conducted by the country’s leading newspaper. Some neighborhoods only receive water once every three days.

 

Water is being rationed to nearly 6 million people living in a total of 142 cities across 11 states in Brazil, the world’s leading exporter of soybeans, coffee, orange juice, sugar and beef. Water supply companies told the Folha de S. Paulo newspaper that the country’s reservoirs, rivers and streams are the driest they have been in 20 years. A record heat wave could raise energy prices and damage crops.

 

Some neighborhoods in the city of Itu in Sao Paulo state (which accounts for one-quarter of Brazil’s population and one-third of its GDP), only receive water once every three days, for a total of 13 hours.

Most people just assume that we will always have massive quantities of cheap, affordable food in our supermarkets.

But just because that has been the case for as long as most of us can remember, that does not mean that it will always be true.

Times are changing, and food prices are already starting to move upward aggressively.

Yes, let us hope for the best, but let us also prepare for the worst.

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

In what the firm believes will be an improvement over other so-called dark pools because it will be a collaboration among big mutual-fund firms, WSJ reports that the giant fund manager is quietly building a new trading venue designed to let big money managers sidestep many of the problems that they argue lead to unfair or costly trading – i.e. avoid the HFT predation. Fidelity, with $1.95 trillion of assets under management, is in the initial stages of planning the trading venue and has just begun to pitch the idea to other large asset managers. It seems 5 years of vociferous exposure and a Michael Lewis book may be beginning to starve the HFTs of their prey.

 

As WSJ reports,

The venue, if successfully launched, would represent an ambitious effort to reduce costs and streamline trading for the investment firms. The project is tentatively named “Sakura,” which is the Japanese word for cherry blossom, according to people familiar with the matter.

 

…

 

Plans for “Sakura” are emerging alongside a broadening debate about the fairness of the U.S. equity markets. Discussions have been stoked in part by a new book by Michael Lewis that alleges the markets are “rigged” in favor of exchanges, high-frequency traders and big banks at the expense of retail and institutional investors.

 

…

 

The new trading system would be different from the dark pool already operated by Fidelity called CrossStream.

It seems, the guys at Goldman were on to something… Perhaps, like Goldman, Fidelity knows that “unless things change, there’s going to be a massive crash – a flash crash times ten…”

 

And that would not be good for Fidelity’s AUM…

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The Nikkei 225 is down over 700 points from the post-FOMC minutes exuberance with major volume hitting the open in Japan.

 

Japanese stocks are now down 15% from their high and trading at six-month lows (and the cheapest to the Dow in 15 months). USDJPY is tumbling further (though the standard opening knee-jerk stop-run is being attempted).

 

Within the broader Topix index, Japanese bank stocks have just hit a bear market (down over 20% from their highs) at 10-months.

 

 

When asked how he felt about this, we suspect Abe said “depends.”

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Submitted by Adam Taggart via Peak Prosperity,

Every once in a while, an Off the Cuff interview is so important that we decide to make it available to the entire public. This is one of those occasions.

In this week's Off the Cuff podcast, Chris and Alasdair Macleod build on the insights laid out in Chris' recent mega-report last week on gold: The Screaming Fundamentals for Owning Gold. And specifically, they delve deeply into the poorly-understood topic of why Chinese demand has become such a game changer in recent years.

In my opinion, this podcast offers the best clarity I've heard to-date in explaining:

• what the true measurement of annual Chinese bullion demand actually is (hint: it's even bigger than you imagine)
• what the implications of China's gold voraciousness will be
• why Western central banks had to smash the price of gold last April
• why Chinese demand exploded at these lower prices, putting the Fed and other Western central banks into a trap (kill the banks or kill their currencies)
• why the Fed is desperate to keep the price low for as long as possible (and why this suppression will fail)
• why the Eastern attitude towards gold will trump the West's

In regard to the last point, Alasdair pithily summarized a critical dynamic that, in my opinion, is as hugely important as it is under-appreciated:

In the rest of the world and particularly Asia, people do not think like we do. As far as they're concerned, gold is the only long term asset worth holding. It is the family pension fund. I like quoting the typical situation in India. I first went to India in 1965 and the price of gold at that stage in rupees was around about 170 rupees an ounce. Today it's about 100,000 rupees an ounce. And when you think that the young man getting married at that time — he'll be a grandfather now — he would have got a dowry from his wife's family which would have been in gold. His presents would have been gold. Every time they had children there would have been gold. Every time there's a festival there would be gold. Gold is the family pension fund. What other investment has gone from 170 rupees to 100,000 rupees over that period of time? Absolutely nothing! There isn't even an alternative like sensible equities or anything like that for them to play. Gold is the only way they can escape the devaluation of the rupee. And so no wonder it's so popular. That's the story all over Asia, by the way.

 

I think the financial press in the West, the mainstream media, basically they rely for their information on analysts in the bullion banks. And the bullion banks are always short. And so they always get a negative story. Universities teach people economics, the Keynesian variety and the monetarist variety. And there is an assumption that gold is no longer money. It is just a commodity with peculiar characteristics.

 

Now whether the West is right or wrong is not the point. The point is there are 4 billion people in Asia who have got a very old-fashioned view of gold, and they have become wealthy over the last twenty years. And their view is likely to prevail against the <1 billion of us in North America and Western Europe. I mean it really is as simple as that. It's not a question of Austrian economics, or Keynesian, or whatever. We're outnumbered. 

To help drive this point home, consider this…

Click the play button below to listen to Chris' interview with Alasdair Macleod (54m:32s):

 

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Last week BTFD failed for the Nasdaq and that class of talking-heads that we like to call asset-gatherers promulgated that there was no need to worry… this is a small segment of the market dragging down a high-beta index, rotate to bigger caps. The S&P has not failed the BTFD brigade since QE4EVA began… until today. For the first time, the S&P 500 cash index was unable to make a new high after bouncing off the 50DMA (in fact making a new cycle low)… now what?

click image for huge legible version

 

Remember, “you buy the fucking dip… because if you don’t, you’re a fucking idiot”

 

 

Unless it’s different this time…

“I think it’s very likely that we’re seeing, in the next 12 months, an ’87-type of crash,” warns a somewhat excited sounding Marc Faber, adding that he thinks “it will be worse.”

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We never thought it could happen: the day when the idiocy of the SEC would reach its absolute zenith so that it would never again be surpassed. It happaned.

The SEC still hasn’t introduced many rules aimed specifically at high-frequency traders. Some commissioners are getting restless. “The perception for many is that the markets aren’t fair for the average investor,” says Republican Commissioner Daniel Gallagher, who has repeatedly called for the agency to review its trading rules since 2012. “Even if that’s not supported by the facts, that perception is a reality that we need to address as soon as possible.” Speaking to reporters on April 8, Democratic Commissioner Kara Stein said the SEC needs new rules to keep pace with the changing market: “A lot of our rules were written for people and not necessarily for computers.“

There is nothing we can add to this.

Source: Bloomberg

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Obamacare has been such a smashing success that the US Health Secretary Kathleen Sebelius just couldn’t wait until days after its “successful” rol out to get the hell out of dodge.

Sebelius is out. HHS secretary has told Obama she is resigning. Obama to nominate OMB’s Sylvia Matthews Burwell on Friday, per WH officials

— Michael D. Shear (@shearm) April 10, 2014

From the NYT:

Kathleen Sebelius, the health and human services secretary, is resigning, ending a stormy five-year tenure marred by the disastrous rollout of President Obama’s signature legislative achievement, the Affordable Care Act.

 

Mr. Obama accepted Ms. Sebelius’s resignation this week, and on Friday morning he will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her, officials said.

 

The departure comes as the Obama administration tries to move beyond its early stumbles in carrying out the law, persuade a still-skeptical public of its lasting benefits, and help Democratic incumbents, who face blistering attack ads after supporting the legislation, survive the midterm elections this fall.

 

Officials said Ms. Sebelius, 65, made the decision to resign and was not forced out. But the frustration at the White House over her performance had become increasingly clear, as administration aides worried that the crippling problems at HealthCare.gov, the website set up to enroll Americans in insurance exchanges, would result in lasting damage to the president’s legacy.

 

Even last week, as Mr. Obama triumphantly announced that enrollments in the exchanges had exceeded seven million, she did not appear next to him for the news conference in the Rose Garden.

 

The president is hoping that Ms. Burwell, 48, a Harvard- and Oxford-educated West Virginia native with a background in economic policy, will bring an intense focus and management acumen to the department. The budget office, which she has overseen since April of last year, is deeply involved in developing and carrying out health care policy.

 

“The president wants to make sure we have a proven manager and relentless implementer in the job over there, which is why he is going to nominate Sylvia,” said Denis R. McDonough, the White House chief of staff.

 

Last month, Ms. Sebelius approached Mr. Obama and began a series of conversations about her future, Mr. McDonough said. The secretary told the president that the March 31 deadline for sign-ups under the health care law — and rising enrollment numbers — provided an opportunity for change, and that he would be best served by someone who was not the target of so much political ire, Mr. McDonough said.

 

“What was clear is that she thought that it was time to transition the leadership to somebody else,” he said. “She’s made clear in other comments publicly that she recognizes that she takes a lot of the incoming. She does hope — all of us hope — that we can get beyond the partisan sniping.”

 

The resignation is a low point in what had been a remarkable career for Ms. Sebelius, who as governor of Kansas was named by Time magazine as one of the five best governors in the country and was even mentioned as a possible running mate for Mr. Obama in 2008. The two had bonded when Ms. Sebelius endorsed his presidential bid early in 2008, becoming one of the highest-profile Democratic women to back him over Hillary Rodham Clinton, and helping him deliver a big win in the Kansas caucus.

The punchline:

Ms. Sebelius said she hoped — but did not expect — that her departure would represent the beginning of a more cooperative period in Washington to make health care better.  “If I could take something along with me,” she said, it would be “all the animosity. If that could just leave with me, and we could get to a new chapter, that would be terrific.”

That won’t happen: after all the populace has to be entertained by the ongoing raging class war distracting it from the far more important obliteration of the US middle class by the Wall Street-Washington-Fed symbotic, parasitic complex.

Next questions: will Sebelius get to keep her health insurance, and at which Wall Street firm or Insurance corporation will she end up? Anyone who replies managing director in Goldman’s healthcare group is disqualified, that answer is far too obvious.

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

Submitted by David Stockman via Contra Corner blog,

Dr.Yellen is at it again. Noting that there is still “slack” in the labor market, she insists that more liquidity pumping action by the Fed is warranted:

“Based on the evidence, my own view is that a significant amount of the decline in participation during the recovery is due to slack, another sign that help from the Fed can still be effective.”

Once again, what Yellen is really saying is that our macroeconomic bathtub is not yet full to the brim—owing to insufficient aggregate “demand”. The purpose of the Fed’s “accommodative” policy, therefore, is to flood the American economy with additional consumer and investment spending—so that “slack” or unutilized labor and capital resources will be “pulled” into production. Thus guided by the visible hand of the Fed, a virtuous cycle of rising spending, output and income will at length levitate our $17 trillion economy to its full-employment potential.

As a practical matter, however, the Fed cannot stimulate additional “spending” unless it can also cause the economy’s leverage ratio to rise, thereby supplementing “spending” derived from current income with purchases financed by freshly minted (incremental) credit. Yet the flood of demand by which the Fed endeavors to “pull” idle and underemployed workers back into production cannot be activated if the US economy has reached a condition of peak debt, as I strongly believe to be the case. Indeed, when the credit expansion channel is broken and done, all the Fed’s liquidity “accommodation” flows into the Wall Street finance channel where it pulls up the price of existing financial assets, not the employment rate of idle labor.

And it cannot be gainsaid that the Fed is entirely ignoring the facts of peak debt and the broken credit channel it implies.  For approximately 35 years, the ratio of household debt to wage and salary income ratcheted steadily upward from 80% to 210%. But once household leverage reached the latter precarious peak under the lunatic mortgage blow-off during 2002-2007, it buckled and now stands at about 180%.

Yet why would it be reasonable to expect a retracement back to the 2007 peak—even if the madness of the student loan explosion continues or sub-prime auto lending keeps surging? These are minor upwellings compared to the $10 trillion mortgage mountain. Besides, a renewed household borrowing binge is not going to happen due to the baby-boom retirement crush, which liquidates household debt, and the “Dodd-Franking” of the banking system, which inhibits lending—risky and otherwise. So the Fed’s transmission mechanism to the household sector is blocked.

The same is true of the business sector. After exploding from $5 trillion to $11 trillion in the decade up to the 2007 peak, it has continued to climb owing to the yield-seeking boom in demand for corporate bonds, and now exceeds $13.5 trillion. But virtually the entire $2.5 trillion lift since the financial crisis has gone into financial engineering extractions such as LBOs, stock buybacks and M&A deals. That is, new credit has flowed into the re-pricing of existing assets rather than the acquisition of productive plant and equipment. Indeed, the latter is still $100 billion or 8% below it late 2007 level in real terms, marking the worst 7-year investment performance since WWII.  So the business credit expansion channel to higher GDP is blocked, too.

This much is obvious, yet Yellen and her monetary politburo keep on attempting to flood the nation’s macroeconomic bathtub with more “demand”. Worse still, they fail to note that even if they could induce business and households to bury themselves deeper in debt that it wouldn’t necessarily have a salutary impact on the “labor market”— the ostensible target of their strenuous ministrations.

The graphs below are dispositive. The first shows that literally not a single net new NFP payroll job outside of the fiscally-driven HES Complex (health, education and social services) has been created in the US economy since January 2000. There were 106.6 million such jobs when Bill Clinton left office–virtually the same number (106.4 million) reported last Friday for March 2014.

By contrast, the Fed’s balance sheet was $500 billion then and $4.5 trillion today–a 9X gain. Needless to say, this comparison does not comprehend a brief interval; it encompasses the greatest monetary policy experiment ever undertaken and suggests that there is no link whatsoever between the Fed’s policy of radical balance sheet expansion and job market developments.

A closer look at the HES Complex further underscores the non-existent link between strenuous money printing and the labor market. Nearly half of the 31 million jobs in this sector are in education, including both public and private institutions. It is self-evident that the driving force here is fiscal policy, not the word clouds and monetary injections which emanate from the Eccles Building.

In a word, after robust growth up to the 2007 peak, education jobs have been flat as a pancake because governments are broke. Stated differently, the phony prosperity of the Greenspan Bubble years led state and local governments especially to over expand education spending based on non-sustainable revenue windfalls from the housing and credit binge. That one-time expansion is now deep in the rearview mirror.

Essentially the same thing is occurring in the balance of the HES Complex. Health care job growth is also beginning to slow significantly in response to the tightening fiscal equation at the Federal level. In any event, for several decades it was possible to induce households to buy more autos, big screen TVs and trips to Disneyland on mortgages and credit cards, but that has never been the case for health care. Demand surged for decades due to the perverse incentives of the third-party payment system and heavy government subsidies, not because of the household credit channel through which monetary policy was formerly transmitted.

In short, any reasonable examination of the NFP data based on longer term trends and on disaggregation of the lump-sum monthly number which comprises the Jobs Friday “print” demonstrates the silliness of the Fed’s “labor market” excuse for running the printing presses at white hot speed. The graph below, for instance, shows the dismal 14 year trend in good-producing jobs in manufacturing, construction and mining/energy.

Here we are reminded that the US economy is not a closed bathtub. Much of the credit-fueled demand for goods in the decades leading up to the financial crisis “leaked” into foreign production, not increased utilization of domestic capacity and labor. So the dramatic decline of the very best paying jobs in the US economy was a structural issue related to high domestic wage rates and the competitive dynamic of the global economy in tradable goods; it had virtually nothing to do with the massive expansion of the Fed’s balance sheet—other than the perverse impact that that the latter permitted the American consumer to live high on the hog on borrowed money used to purchase Chinese manufactures:

Finally, the Fed’s serial bubbles have also impacted the job market—but not especially in the manner intended. With each successive inflation of financial assets, households in the upper reaches of the income ladder have been able to increase discretionary spending for leisure and entertainment spending, thereby causing a punctuated rise in the job count . However, jobs in the Bread &Circuses Economy have a pay rate of barely $20k per year—meaning that they have added a lot more to the monthly jobs print than to the real prosperity of the Main Street economy.

 

via Zero Hedge http://ift.tt/1jx2e3c Tyler Durden

With 30 year bond yields set to close their lowest in 10 months, CNBC’s Rick Santelli is concerned at the signals that the Treasury yield curve is sending.If yesterday’s minutes from the Fed were supposed to walk back their ‘hawkish’ tone, then Santelli slams they are “gonna need a really big billboard” because the term structure is still flattening. “When ‘flattening’ is the theme, that is not painting a rosy outlook for the long-term economy,” and as Santelli warns, this is when the Fed is pulling out of its extraordinary policies. Santelli screams, “the entire monetary policy side has to be under review…” and the only way you can keep the fallacy alive is “if you sell it as a ‘deflationary’ issue, where you can keep trying the same thing that isn’t working.”

As Santelli explains in this brief clip,

“if anything [exogenous] were to happen to our markets or economy, where do they go next? How do they ease? Policy should have been normalized already and we’re paying a price for it.”

Simply put, the central banks now need to instil a fear of deflation to enable their ZIRP for longer forward guidance.

“Don’t ignore the long-end, and don’t buy into deflation… it’s telling you recessionary pressures are building”

 

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At first we though this is AP’s version of Thursday humor however upon close examination it turned out to be all too real. Moments ago a woman was taken under arrest after throwing what she described as a shoe at the person who may well be America’s next president, Hillary Clinton, during a Las Vegas speech.

The incident happened moments after Clinton took the stage Thursday at an Institute of Scrap Recycling Industries meeting at the Mandalay Bay hotel-casino. Clinton ducked but did not appear to be hit by the object, and then joked about the incident.

 

Security ushered out a woman who said she threw a shoe but didn’t identify herself to reporters or explain the action. Authorities said the woman would be arrested.

 

The former U.S. secretary of state and Democratic senator from New York has been traveling the country giving paid speeches to industry organizations and appearing before key Democratic Party constituents.

Of course, the shoe-throwing assailant had little chance of hitting her mark. After all Hillary has extensive experience with ducking and covering away from flying projectiles, most recently in “liberated” Egypt where her motorcade was pelted by a “Monica”-chanting crowd with both flying shoes…

 

… and tomatoes.

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