Tag: news

Submitted by Ben Tanosborn of Tanosborn.com,

It had to happen!  The blame game on that horrendous airline incident, Malaysian Flight MH17, has reached the expected loud monotone of pointing fault, lock, stock and barrel at Russia… and, more specifically, to that villain ex-KGB Slav, Vladimir Putin.
 
US media barrage of grotesque and obscene propaganda against America’s former foe and competitor, whether filtering down from the top or randomly finding placement in the emotions of a brainwashed citizenry, has found a leader of this warring marching band in Barack Obama.  The neocon ruling forces in the US State Department together with the bellicosarians running the Pentagon have found a perfect mouthpiece in the president of the US, an unlikely candidate just a few years ago, to do their bidding in Leo Strauss’ messianic vision to rule the World.
 
America’s few leadership voices of dissent and reasonableness against such ill-conceived propaganda, those of Libertarian Ron Paul and Professor Stephen Cohen (NY University) uniquely standing out, are drowned in a sea of US-poisoned waters where an armada of sanctions is unjustly landing on a nation, Russia, which dares stand for a right to secure its own historic geopolitical status… doing so without expressed or implied ambitions to extend its power and influence over others in the world… as the US does.
 
If blame is to be directed at any nation for the downing of this aircraft, the investigation needs to be pointed at what has transpired during this past year in Ukraine.  It was not Russia, or separatists in Eastern Ukraine, that created Ukraine’s political chaos.  It was the United States using its money and influence over a subservient European Union that brought down the democratically elected government in Kiev and stirred the ultimate separatist unrest.  So, if anyone is deserving of the ultimate, root-cause blame for this sordid loss of life, it should be the United States Machiavellian players now running Washington.  However, we might honor the memory of these innocent victims of flight MH17 by reaching a modus operandi consensus so that incidents such as this do not occur again.
 
But how is the world to counter the power of any nation, or block of nations, running amok to establish some form of supremacy over the rest?
 
We are just a year short of seven decades having a world body as a go-to place where the world problems can be voiced, discussed and hopefully resolved.  But as its ill-fated predecessor, the League of Nations, the United Nations was the creation of victorious nations after a world war… and those major victorious nations, singly or in commonality of interests with allies and partners, always appear to maintain their veto-of-interest over what might be right or fair, regardless of voted-on resolutions, or findings.
 
Although in some areas the UN has provided mankind a measure of solace and benefit, in key areas of peace, human rights and universal justice, it has not netted the minimum passing grade, thus indicating to the world that its charter needs to either be revised (rewritten); or that the world at large must direct their hopes and expectations in other directions where arbitration and eventual resolution of problems rule the day.
 
When one sees in the news UN Secretary-General Ban Ki-moon standing side by side with US Secretary of State John Kerry, in an alliance unlikely to stop Netanyahu’s blood-letting in Gaza, we correctly assume it to be what it really is: another diplomatic ploy.  Ultimately placing the blame on Hamas for not agreeing to the peace-plan-du-jour offered by Egypt, and consented to by the Arab League, will not resolve the endless conflict in which Palestine has been mired since the creation of modern Israel in 1947.  All players involved in finding a solution for a peaceful Palestine have failed repeatedly, possibly – some would say precisely – because of the US prejudicial involvement in the entire affair, and the definitive Zionist control over American foreign policy.
 
If the UN is incapable to change or influence the hegemonic geopolitical behavior of the United States… where else can the world look to find resolution to conflicts such as we have in Gaza and Ukraine today?
 
Enter the BRICS group of nations; escorted by other smaller nations that prefer dignified independence to protection from a bully they mistrust.  Can this group bring a friendlier, more humane atmosphere where peace and international brotherhood prevail?  It’s certainly worth a try: a way for 80 percent of the world’s population to find their rightful place; and for the presently ruling 20 percent to become more humanized.
 
Will the BRICS nations take up the challenge?

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…Darth Vader is more popular than all the 2016 Presidential candidates…

 

Source: The Washington Post

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Having shown 11 awkward-to-explain charts of the Chinese economy, exposed the liquidity crisis that still lingers just under the surface, and exposed the "discrepancies that abound" in China's data, it was only right and proper in this new topsy-turvy normal that HSBC China Manufacturing PMI – after 8 months of missed expectations (but a very recent surge to the highest levels in 2014) – should smash expectations and surge to 52.0, its highest sicne Jan 2012 (and 2nd highest since the recovery began).

 

Despite this exuberant data…

Employment fell for the 9th straight month.

 

As an aside, this is the first time in 16 months that HSBC/Markit's PMI has topped the Government's official print (payback for a good IPO?) but we note below what has happened each time in the past that this has happened…

 

With Q2's massive 4x GDP growth surge in total social financing, and the huge 16.4% surge in local government spending in Q2 (6.1% in June alone) compared to a 4% decline in tax revenues; it appears the dragging forward of everything to ensure centrally-planned focused stimulus had the desired outcome has extended (for now) into July's preliminary data.

And just in case anyone gets too excited about what PMI means, here is what BofA research found: "In our view, these data get way too much air time. They give a timely, rough read on the economy, but should get little weight once hard data are released."

*  *  *

As we concluded previously, what is clear is that, taking the numbers at face value, debt levels are still rising with destructive rapidity in order to achieve even such spotty results as these.

 

 

Coming from the broadest perspective, Nominal GDP in the June quarter was an annualized CNY4.7 trillion greater than that of a year a year ago, but in that like period the stock of ‘total social financing' outstanding mounted almost four times as much, or by CNY17.7 trillion.

 

Chart: Bloomberg

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Submitted by David Stockman of Contra Corner blog,

The 2008 Wall Street meltdown is long forgotten, having been washed away by a tsunami of central bank liquidity. Indeed, the S&P closed yesterday at 1,983—or up by nearly 200% from its March 2009 low. Yet four cardinal measures of Main Street economic health convey nothing like a 2X pick-up from the post-crisis bottom.

To wit, in June the count of breadwinner jobs was 68.5 million or 5% below where it stood as the crisis got underway. Likewise, business investment in real plant and equipment is still 5% below its late 2007 peak. So too with the real median family income at about $53k—its still down by 6%. And unlike past cycles where safety net programs like food stamps shed recipients as the recovery gained momentum, there are still nearly 47 million Americans in the program compared to 30 million in March 2009.

This juxtaposition has been explained away by Wall Street stock touts under the heading that “this time is different”. Markets have allegedly sprung loose from their moorings in the real economy owing to record corporate profits and an upward re-rating of PE multiples reflecting lower than historical interest rates. And, indeed, the raw facts can be marshaled to this end.

As shown in the stunning chart below, profits have doubled as a share of corporate net value added since the turn of the century. Likewise, when measured against GDP, profits are at 60-year highs.

This is just the trouble, however. The robust rate of profit growth during recent years reflects a one-time gain in the profit share of factor income. This gain in all probability cannot be replicated again during the next decade, and, in fact, is extremely vulnerable to the mean reversion so evident in the historical data above. Indeed, that may have already begun during the first quarter of 2014 when the profit share dropped sharply as shown in both charts above.

The same can be said of low interest rates. After an unprecedented 33-year descent, the yield on the 10-year treasury benchmark has nowhere to go but higher; and after hitting a QE induced rock bottom of 1.5% in mid-2012, the benchmark yield has, in fact, bottomed and begun a climb toward normalization. No amount of money printing and financial repression by the central banks can keep yields on the current massive trove of $12 trillion of publicly held treasury debt at a negative after-tax and after-inflation rate indefinitely.

This is just the trouble, however. The robust rate of profit growth during recent years reflects a one-time gain in the profit share of factor income. This gain in all probability cannot be replicated again during the next decade, and, in fact, is extremely vulnerable to the mean reversion so evident in the historical data above. Indeed, that may have already begun during the first quarter of 2014 when the profit share dropped sharply as shown in both charts above.

The same can be said of low interest rates. After an unprecedented 33-year descent, the yield on the 10-year treasury benchmark has nowhere to go but higher; and after hitting a QE induced rock bottom of 1.5% in mid-2012, the benchmark yield has, in fact, bottomed and begun a climb toward normalization. No amount of money printing and financial repression by the central banks can keep yields on the current massive trove of $12 trillion of publicly held treasury debt at a negative after-tax and after-inflation rate indefinitely.

This all adds up to a case for capitalizing corporate earnings at a rate well below the historical norms, not at the tippy-top of prior experience. But the Wall Street casino is so juiced-up on the Fed’s promise of endless liquidity and puts under the stock averages that it is uninterested in the fundamentals, and will keep buying the dips until some confidence shattering black swan comes flying in from out of the blue.

And that points to the real evil of monetary central planning and the serial financial bubbles that it inexorably produces. Bubbles are now only recognized after they burst into a flaming crash. The chart below regarding the $2.3 trillion private label market in securitized sub-prime mortgages created by Wall Street in the run up to the last bubble top says it all.

 

What were heralded to be money-good par securities because “that time was different” have ended up in a smoldering pile of toxic waste.

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Back in the beginning of 2014, Goldman loudly predicted that 2014 would be the year of normalization: the economy would grow by 3%, the S&P 500 would barely rise to 1900, and gold would tumble to $1066. By now it goes without saying that it has been dead wrong about the first with the economy set for a contraction in the first half of 2014 and the full year assured to have the worst GDP growth since Lehman, wrong about the second with the market now so clearly disconnected from any economic fundamentals nobody even pretends that it is anything but the Fed manipulating a rigged stock market, and has been painfully wrong about the third.

So with less than 6 months to go until the end of the year, with various gold ETFs suddenly seeing the biggest buying in years, and with gold continuing to outperform most asset classes YTD, what is Goldman to do? Why follow the trend of course, and just like David Kostin had no choice but to boost his S&P 500 price target using the idiotic Fed model as a basis, so earlier today Goldman just upgraded its gold price target from $1,066 to $1,200. Probably this means that after accumulating it for the first half of the year, Goldman is finally preparing to sell the precious metal. Not so fast: because while Goldman did just raised its price target, it continues to have a Conviction Sell rating on Gold, which is its second most hated commodity after iron ore. Go figure.

So without further ado, here is Goldman going full schizo.

Conviction views: Bearish on iron ore, gold and copper, bullish on nickel, zinc, aluminium and palladium. In gold, we raise our LT price forecasts to $1,200/oz in $2014 terms from $1,066 earlier. Over long time horizons, the gold price has been relatively stable in real terms, keeping pace with inflation. Accordingly we use a flat real gold price forecast assuming gold is an effective inflation hedge and increase in nominal  gold prices should offset the impact from inflation. We believe iron ore (-21%), gold (-20%) and copper (-12%) are the mining commodities with the greatest downside on a 12-month view.

* * *

 

We have updated our long-term real gold price forecast to $1,200/oz in $2014 terms (was $1,066/oz) to make it more in-line with our marginal cost support level, see Exhibit 66. Currently gold is trading at a 9% premium to our LT real (inflation-adjusted) forecast but we believe on a long-term basis the price should revert back to the cost support level in-line with our estimates.

 

 

Marginal cost support at $1,200/oz level

 

In our view, the 90th percentile of all-in sustaining costs (defined as total by-product cash cost plus royalty expense, plus sustaining capex, exploration and corporate expenses) provides a good estimate of the floor price for gold, as it is the breakeven level for the marginal producer. At times of extreme declines in demand, it is possible for prices to fall below the marginal cost support level; however we believe such events are generally shortlived. Exhibit 67 shows our latest 2014 gold’s all-in sustaining cost curve.

 

 

Gold price relatively stable over the long term

 

Over long time horizons, the real gold price has been relatively stable, keeping pace with inflation. Exhibit 68 illustrates that the real price of gold was fairly constant until the early 1970s, after which it became highly volatile. Although the real price has experienced significant volatility post the 1970s, we highlight its tendency to a mean reversion trend. The real gold price fell back to the 1950s level in 2001 after peaking in 1980, and it is currently in decline again after peaking in 2011.

 

Where things get downright bizarre is the last paragraph where either Goldman had a humongous typo or merely pulled the boilerplate language from a prior report where for some inexplicable reason Goldman says it has a “$1050” price target even as the table above clearly says $1,200. Oh who cares: this whole report is merely for the benefit of Goldman’s prop desk, which is clearly ramping up trading, to do the opposite of whatever Goldman’s few remaining clients are doing.

We continue to remain bearish on gold in 2014

 

We expect gold prices to drop to $1,050/oz by the end of 2014, maintaining our previous forecast. Acceleration in the US economic recovery story remains the key driver behind our lower gold price forecast. While weak economic data due to cold weather and the onset of the Crimea crisis led to a sharp rally in gold prices between January and mid-March, sequentially better US activity and easing tensions pushed gold prices lower by early April. Since then, US economic releases have continued to point to acceleration in growth while tensions in Ukraine have escalated, keeping gold prices range bound near $1,300/toz.

Sure, why not.

That said, can Goldman please also advise if its suddenly very active prop group is buying or selling gold. We promise to do whatever they are doing.

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Japanese exports have disappointed expectations for 6 of the last 7 months. June saw exports drop 2.0% (versus an expectation of a rise of 1.0%). This is the first consecutive month drop in exports since Dec 2012 (before Abenomics was unleashed). Despite eysterday’s incessant bullshit from various BoJ member about the economy being on track for receovery etc. the adjusted trade balane has now been in deficit for 39 months in a row with June’s unadjusted trade-deficit dramatically worse than expected at JPY822billion. For a sense of how much this disaster means to markets that have become so numbed thanks to central bank intervention, USDJPY fell 2 pips on the news… it’s not the economy, stupid; it’s the BoJ.

 

 

Charts: Bloomberg

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Submitted by Simon Black of Sovereign Man blog,

Sadly today I am reporting to you yet another development that seems as if we are all living within the pages of Ayn Rand’s seminal work Atlas Shrugged.

You may recall from the book that John Galt, the enigmatic protagonist, started off as a young engineer at the Twentieth Century Motor Company.

When the owner of the company died, the heirs decided to run the business according to the new enlightened principles of the time.

Primarily, they let all the workers vote on how the factory was supposed to be run and how much everyone should be compensated.

And it was soon decided that “everybody in the factory would work according to his ability, but would be paid according to his needs.”

Naturally, bright hard-working employees soon left; they found themselves working around the clock for the benefit of others who felt entitled to contribute as little as possible.

John Galt was among the first out the door.

And not long after, the once successful company went bust. No surprise.

Unfortunately this is no longer fiction. Because in the Land of the Free, the United States Congress is striving to make Atlas Shrugged a reality.

Their latest brainchild is to set up a new government bank, stuff it full of taxpayer funds, and loan the money to American workers for the exclusive purpose to help them form collectives and buy the companies they work for.

It’s called the United States Employee Ownership Bank Act.

And, straight from the bill, they aim to provide “loan guarantees, direct loans, and technical assistance to employees to buy their own companies. . .”

The goal of this legislation, curiously, is to “preserve and increase employment in the United States” which is still problematic six years after the global financial crisis.

Since September 2008, the US government has increased its debt level over 50% to $17.6 trillion.

The US Federal Reserve has increased its balance sheet four-fold, conjuring $3.5 trillion out of thin air.

All of this was supposed to create jobs. And with each of these being a failed policy, Congress is now descending into outright socialism.

To be fair, people throw around the word socialism a lot. They’ll say “Obama’s a socialist” or something like that. Often it’s taken to exaggeration.

But this legislation– the government effectively sponsoring the communal takeover of private business– is textbook socialism: private property and the means of production owned by the community.

Socialist Yugoslavia actually tried the exact same thing: worker-owned cooperatives. And the consequent failure was absolutely epic.

But politicians never let pesky things like truth get in the way of a bad idea.

It’s time to wake up smell the reality. This isn’t about panic. It isn’t about doom and gloom. It’s about facts, not fear.

Any rational, thinking person has to look at this and ask a simple question: where is this trend headed?

The evidence is pretty clear. And more and more people are starting to realize it.

People all over the world are thinking: “This is not the country I grew up in. And I don’t like the trend.”

It’s unfolding right in front of our very eyes for anyone with the intellectual courage to pay attention.

Whether it happens today, tomorrow, or five years from now is irrelevant. It’s the TREND that is so important to pay attention to.

And with that simple premise in mind, does it make sense to hold everything you’ve worked your entire life to build in a place with such a negative trend?

Your livelihood. Your savings. Your retirement. Your family’s security.

Rational people look at facts objectively and have a plan B. What’s yours?

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U.S. Senate Democrats included $225 million for Israel’s Iron Dome rocket interception system in an emergency funding bill on Tuesday, which, as Bloomberg reports, in addition to the $351 million that’s already under discussion for Iron Dome in fiscal 2015 would bring the potential new funding to $576 million, compared with the $176 million currently requested by the Pentagon. “Iron Dome has saved countless Israeli lives,” Defense Secretary Chuck Hagel told Senate Majority Leader Harry Reid in a letter dated yesterday and while the Iron Dome system is built by Haifa-based Rafael Advanced Defense Systems Ltd, an agreement with Israel calls for more than half the funds the Pentagon provides for Iron Dome to be spent in the U.S..

 

As Reuters reports,

U.S. Senate Democrats included $225 million for Israel’s Iron Dome rocket interception system in an emergency funding bill on Tuesday that also cut $1 billion from President Barack Obama’s request for $3.7 billion to deal with thousands of undocumented child immigrants.

 

“Israel is an essential American ally and needs these assets to defend itself,” said Maryland Democratic Senator Barbara Mikulski, chairwoman of the Senate Appropriations Committee, in a statement.

 

…

 

U.S. lawmakers tend to be heavily pro-Israel. However, the fate of the $225 million – and other funding in the legislation – is uncertain in the Republican-controlled U.S. House of Representatives, where there is stiff opposition to an increase in spending tied to the Democratic president’s request.

This almost triples the aid for Israel (as Bloomberg reports),

The money — which would be included in an emergency spending bill directed mostly at child-migration issues on the U.S.-Mexico border — would be in addition to the $351 million that’s already under discussion for Iron Dome in fiscal 2015. It would bring the potential new funding to $576 million, compared with the $176 million requested by the Pentagon for the year that begins Oct. 1.

…

The added $225 million for the current fiscal year would be used “to accelerate production of Iron Dome components in Israel to maintain adequate stockpiles,” Hagel said in the letter.

“Iron Dome has saved countless Israeli lives,” Defense Secretary Chuck Hagel told Senate Majority Leader Harry Reid in a letter dated yesterday

An agreement with Israel calls for more than half the funds the Pentagon provides for Iron Dome to be spent in the U.S.

*  *  *
We can almost hear the teleprompter now that Republicans (should they block this spending) would have the blood of dead Israeli children on their hands…

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