And since Friday is always a heavy refund issuance day, it is probably safe to say that Treasury cash is now down in the lower $20 billion. Although we probably won't know: if the FMS is shutdown on Monday there will be no DTS debt report. Why is this important? Because in 8 hours this may be the snapshot cash for the US Treasury for a long time, or as long as it takes for the two parties to find a resolution over the glaring hole that is 0.001% of the budget deficit. Luckily, auctions will continue... For so long as the formal debt ceiling is finally breached, in a few weeks. Good luck with that negotiation.
Two weeks ago, we when we disclosed the most recent expansion in the IMF's funding with the announcement of the activation of a "Special Funding Pool" we predicted: "Bottom line: there is a new threat to the international monetary system which means Europe May 2010 redux is imminent. US taxpayers: our condolences." Alas, as tends to happen in these cases, we were right. The IMF, whose number one source of funding is you, dear US taxpayer, has just received a bailout request from Portugal.
Yesterday we reported that China just hiked its fuel prices for only the second time in 2011. Now, again courtesy of Business China, we find that something far more important to the Chinese population is about to surge in price: beer. "The National Development and Reform Commission (NDRC), China’s top economic planner, has hauled in representatives from China’s four largest beer makers (China Resources Snow Breweries Co. Ltd., Tsingtao Brewery Co. Ltd., Beijing Yanjing Brewery Co. Ltd. and the China unit of Belgian Anheuser-Busch InBev NV ) for talks over their price hikes, as it looks to tackle public concerns over soaring inflation. " Since February, the cost of beer production has risen by RMB 94 per ton, which explains the beer makers’ unanimous price hikes,” the person said. Since January, CR Snow Breweries, China’s largest brewer by volume, has raised prices by more than 10% in Sichuan, Liaoning and Anhui provinces, where it enjoys a dominant position in the market. Tsingtao Brewery also hiked prices of several products in the following months by an average of 10%, the company announced earlier." This follows news from the China Securities Journal that Chinese CPI, which recently dipped again below 5%, is about to have a breakaway month in March. "Chinese consumer prices are likely to rise more
than 5% year-on-year in each month in the second quarter and the
inflation rate may even surpass 6% in some months, the official China
Securities Journal warned in a front page editorial published Wednesday." And while energy is energy is a major component of Chinese CPI, it is food that is the main variable: as was discussed previously on Zero Hedge, whereas food is merely 7.8% of total CPI, in China it is about 30% (this is before the recent CPI weighting adjustment). Which means a desperate China is now forced to resort to that ultimately last ditch attempt at covering surging prices- Shrinkage "Resigned to rising raw materials prices, brewers are figuring out new ways to offset higher costs. “One way of countering the costs is to reduce beer capacity by as much as 100 milliliters for a 660-ml bottle,” said the head of a local beer company." Surely, the dumb local peasantry will never figure this cheap trick out.
"When a country's public debt exceeds 90% of GDP, that is the magic number. You get to 90%, there is no way back, and that is the number that the U.S. is going through pretty much as we speak. It is also the number which the UK has gone through; all of the PIGS are going through it, as well. They are all going past the 90% debt to GDP ratio. Obviously, Japan is miles past it already. It's up to 200%+. There does not appear, in the historical analysis, to be any great likelihood of getting back from that level of debt safely. There is this strong evidence that above 90% debt to GDP, you will experience either a cataclysmic default or some form of very serious inflation." So observes Paul Tustain, gold market analyst and founder of BullionVault. In his view, gold serves as a beacon who's price is currently signalling the monetary system is in grave danger. He and Chris Martenson discuss the primary factors driving the price of gold and smart strategies for investors looking to build or maintain their holdings of the metal.
In an brief two paragraph blurb on its brand spanking new blog Liberty Street Economic, a post by "Blog Author" (one wonders if the New York Fed is as cheap in providing its bloggers with a blogging facilities as it is when "giving" the POMO interns Bloomberg terminals), the FRBNY provides a trite if enjoyable summary of the thinking that prompted the creation of the Fed, courtesy of one F.A. Vanderlip, president of Citibank, which apparently was as insolvent back in 1907 as it is now. The premise: the Fed is the cause of monetary stability and the prevention of "disorderly retreats or advances." That's actually supremely ironic because as John Lohman points out the main trade off, namely the 2,313% increase in CPI, ended up shafting the market to an even bigger crash in 2008 than the panic of 1907. But at least in the interim 101 years the Fed's overlords from Wall Street, managed to steal over 98% of the wealth of Americans in the form of shadow currency devaluation better known as inflation. So who cares about facts when that 5th private Polynesian island for Jamie Dimon has been fully paid for and all three underground cellars are stocked with gold...
When buying story stocks, one can believe the hype behind the story, or actually look at the facts. And when it comes to malls, and commercial real estate in general, the double dip, despite that whole consumer is recovering myth, is here. The WSJ report that "mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%." But wait: wasn't the resurging US consumer supposed to be able to carry the overbloated US retail front? That's part of the "story" - as for the "fact" Howard Davidowitz summarized it best: "We've got 21 square feet of selling space for every man, woman and child in this country." Perhaps it is time for the Fed to (again) start buying up empty retail boxes: because even the Fed knows what happens to equilibrium price when every bank is trying hard to reignite the CMBS market.
According to Jamie Dimon, he did America a favor when he agreed to take bailout money from taxpayers (and we didn’t even have the decency to thank him). Last week ,we learned that the JP Morgan CEO likes his catastrophe’s predictable, but as Mick Jagger once observed, “You can’t always get what you want.” So in case you’re wondering who might be stupid enough to buy silver at $40, chances are extremely high it’s going to be the guys who sold at $15, $20, $25, 30, 31, 32, 33….. On April 6, Bloomberg reported Comex Silver Stockpiles as of April 5, and if you scroll down through the report, you’ll notice that JP Morgan has enough silver to fill, wait for it, 6 contracts. Yep 30,844 troy ounces, that’s all.
As always happens following massive liquidity injections, there comes a time when the price of oil ends the party prematurely. And with localized Cushing issues preventing another 10% to be tacked on to the cost of gasoline for now, we once again look to Europe for the fair view of what is happening with the energy market. To our surprise we find that there is now only a 5% difference between the all time highs hit in 2008 and currently in the price of Brent expressed in euros. Yet what is of particular interest is that the liquidity induced rally may be about to fizzle: we have no experienced the same near-parabolic blow off top move that we saw at the end of the summer 2008 rally (which ended up with the market plunging over 50%), and the first QE1 which plateaued oil prices and only further hopes of more QE prevented the market from dropping. Is the same fate in store for crude if indeed the Fed is prepared to let the market find its natural clearing price without daily injections of billions.
Earlier this week I discussed the devolution of the consumer economy with a focus on the diminishing returns of consumption and the limits imposed by servicing ever-growing debts. Today I will address a series of other interconnected reasons why the consumer economy is devolving. The cost structure of the entire U.S. economy has bloated to unsustainable levels. Here's the basic mechanism: when money is "free," costs rise. If you had to explain why sickcare in the U.S. consumes 17% of our nation's GDP while other developed nations provide universal care for half that cost per capita (7-9% of their GDP), the answer boils down to "there's an unlimited amount of free money here for sickcare." There are no real limits on Medicaid or Medicare spending, and none on insurance cartels (it's a free market for health insurance, except there's only two providers in your area and their prices are the same--welcome to a "free market," hahahahaha).
Is it time to start quoting that famous William Butler Yeats poem yet?
Some stunning remarks from Dallas Fed's Dick Fisher: " Our duty is most distinctly not to monetize?or even
be perceived as monetizing?the debt of fiscally imprudent government.
Throughout the history of nations, monetizing the budgetary excesses of
governments has proven to be a direct path to economic perdition.
Having already peeked inside that door, I feel strongly that we must
now shut it, lock it and throw away the key." Well, thanks Dick. You are only $2.6 trillion dollars late.
Latest Alleged Chinese Fraud: PUDA Coal (NYSE: PUDA) - $2.66 Price Target, 70% Downside, By Alfred LittleSubmitted by Tyler Durden on 04/08/2011 - 10:05
Notorious contrarian Alfred Little, who recently made a splash in the alleged Chinese fraud basket, by issuing a scathing report against Deer Consumer Products (Nasdaq: DEER) which has since cut the price of the stock in half, yet gotten the author in hot trouble with the company which decided to sue both him and Seeking Alpha which hosted the report (even as shareholders of DEER should be thanking him for issuing the report when the stock was still at $11) is out with his latest report, taking on the next in a seemingly endless sequence of potential frauds (check the Nasdaq halt list and find the most recurring word): Puda Coal, Inc (NYSE: PUDA). Cutting to the chase: "Considering the 2009 and 2010 audited financials can no longer be relied upon, and more importantly the complete lack of internal control that allowed Chairman Zhao to first steal the company, then sell half the company (pocketing the proceeds) and then pledge the other half of the company to a Chinese PE fund while piling on $530.3 million of 14.5% debt, I strongly believe $2.66 is the most this stock is worth today." Those buying puts are cautioned that the stock may halt and never reopen. Place your bets appropriately.
An intrepid Japanese duo has decided to do the reverse Fukushima commute and in a stunning filmed expose, drives through cracked roads, herds of animals in city streets and ghost towns to measure the radiation from 30 km out to 1.5 km away from Fukushima, where it hits 112 microsieverts, or roughly 350 times normal radiation. But don't worry. Everything is still under the recently updgraded (twice) legal limit.... for those clad in lead armor.
Confused why the dollar is getting destroyed, the EURUSD is at 1.44 and nothing makes sense in FX anymore? Here is Citi's Stephan Englander attempting to explain it all.