Archive - Oct 21, 2013

It is rare that investors are given a road map. It is rarer still that the vast majority of those who get it are unable to understand the clear signs and directions it contains. When this happens the few who can actually read the map find themselves in an enviable position. Such is currently the case with gold and gold-related investments.

Last month the world witnessed a paradigm shift: China surpassed the United States as the world’s largest consumer of foreign oil, importing 6.3 million barrels per day compared to the United States’ 6.24 million. This trend is likely to continue and this gap is likely to grow, according to the EIA’s October short-term energy outlook. So what does this shift in oil imports mean?

Responding to widespread criticism regarding its health care website, the federal government today unveiled its new, improved Obamacare program, which allows Americans to purchase health insurance after installing a software bundle contained on 35 floppy disks...

The collapse of American society is accelerating.  For the moment, much of our social decay is being masked by the tremendous level of affluence that we are experiencing in aggregate.  It has been reported that 4 out of every 5 adults in the United States "struggle with joblessness, near-poverty or reliance on welfare for at least parts of their lives", but in general Americans still enjoy a debt-fueled standard of living that is far beyond what most of the rest of the world enjoys.  When that debt-fueled standard of living permanently disappears, it is going to unleash chaos unlike anything that America has ever seen before. So how can we be so sure that this is going to happen?  After all, the United States didn't descend into complete and utter chaos during the Great Depression of the 1930s.  Wouldn't an economic depression unfold in a similar manner today? Unfortunately, a lot has changed since then.  A lot more Americans were self-sufficient back in those days, and the truth is that the character of our nation has been rotting and decaying for decades.

Remember when data mattered? Well, it doesn't anymore (and hasn't since the advent of central planning in 2009). Just to confirm that here is Goldman's preview of tomorrow's nearly two month delayed, September Non-far payrolls, which will be great no matter what, meaning the Fed remains in charge well into 2014. To wit:

"Any positive number will be discounted because it came before the DC theatrics and if it’s weak it confirms that tapering should be put off longer."

Seriously, since absolutely nothing can possibly be bad news any more, can Bernanke just tell us what the closing print on the S&P for every trading day until the end of 2013 is (when it will usher in the new year at right about 1800) and then for 2014, when assuming 1 SPX tick for every $3.5bn in POMO flows, the S&P should close out that year at 2100. It's not like anyone even pretends there is a discounting mechanism left.

The macro picture for the world is dangerous. And high quality companies will not be spared the carnage if a market onslaught begins (which is looking increasingly likely).

Dreams usually come to an end when we get to the good part. The juiciest part of the American dream has ended too

"It is really going to end badly," is the ominous warning that Damien Cleusix has issued to his clients as he believes we are now reaching the top of the secular bull market. Crucially, he sees US stock markets as "grossly over-valued" but that it is hidden from most people's perceptions because (just as in 2000 and 2007) there are marginal sectors that make the 'aggregate' seem reasonable (not to mention the dreams of forward earnings.) His novel approach of a point-in-time Price-to-Sales comp shows the median valuation its highest in 23 years.. and Alan Greenspan's infamous "exuberance" valuations in 1996 were 40% below current levels of elation. Today, the big difference with 2000 and 2007 is that government and central banks have already spend a lot of firing power to "make believe" that everything is fine again. He concludes, "there will be no place to hide when the tide turns."

At some point in the future, interviewers may ask Americans, "How could you just sit by whilst the atrocities occurred?" Americans may shrug their shoulders and say that they were not really aware of what was happening. If and when this comes to pass, will they be lying? Possibly not. It may be that those who had simply "tuned out" were no longer cognizant of the meaning of events around them and were functioning as automatons—servants of the American Reich. The warning signs are becoming more numerous with each passing day. The choice for Americans today is whether to wait and see whether history repeats or whether to plan to be elsewhere before the deterioration advances further.

It would appear, despite the President's urging, that Obamacare's helpline is living up to its mnemonics. As The National Review reports, President Obama emerged on Monday to assure Americans that the “kinks” surrounding the federal and state health-care exchanges are improving and urged consumers to call the exchange hotline if they continue to encounter problems online. Shortly after he made the suggestion, Twitter lit up with reporters and others who attempted to do so but failed to get through to a navigator as promised. Indeed, Mr. President, 1-800-318-2596 to you too...

Yes, the United States dodged another bullet with a last-minute deal on the debt ceiling. But, with 90 days left to bridge the ideological and partisan divide before another crisis erupts, the fuse on America’s debt bomb is getting shorter and shorter. As a dysfunctional US government peers into the abyss, China – America’s largest foreign creditor – has much at stake. For more than 20 years, this mutually beneficial codependency has served both countries well in compensating for their inherent saving imbalances while satisfying their respective growth agendas. But here the past should not be viewed as prologue. A seismic shift is at hand, and America’s recent fiscal follies may well be the tipping point. The days of its open-ended buying of Treasuries will soon come to an end.

"The question is not 'tapering'," Marc Faber exclaims to his hosts on CNBC's Squawk Box this morning, "the question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], or a trillion dollars a month." QE-4-EVA is here to stay, as Faber explained "every government program that is introduced under urgency and as a temporary measure is always permanent." Simply put, "The Fed has boxed itself into a position where there is no exit strategy," and while inflation may not be present in the 'chosen' indicators, Faber blasts, there's been incredible asset inflation - "we are the bubble. We have a colossal asset bubble in the world [and] a leverage or a debt bubble." There will be massive wealth destruction, he concludes, "one day this asset inflation will lead to a deflationary collapse one way or the other. We don't know yet what will cause it."

Why are we so rich and the poor so poor? Econophile takes a look at Kenya as a laboratory of bad ideas and how to fix it.

The high-beta honeys were not amused (despite another melt-up in NFLX into earnings) as the Russell 2000 underperformed (-0.25% on the day). The Dow and S&P ended practically unch, Nasdaq bid (helped by AAPL ahead of the product news tomorrow) and Trannies closed their highs of the day exuberating all the way... Treasury yields rose 2-3bps (steepening). FX was quiet with the USD very slightly higher (helped by JPY weakness) but AUDJPY was in charge of S&P 500 trading today. Oil dropped 1.6% closing back under $100 (first time in over 3 months) and Silver rallied 1.3%. Hedgers were active (6though clearly the selling was limited) as credit spreads and volatility markets saw protection buyers active.

And the hits just keep on coming for McDonalds. An animal rights organization is urging McDonald’s Canada to take a firm stand against what it calls “shocking animal cruelty” captured on a graphic video it says was taken at two Alberta farms, which shows dead hens rotting in the cages, and chicks being covered in feces. . As The Globe and Mail reports, McDonald’s, however, says while it does get eggs from Burnbrae along with many other Canadian companies, it says its eggs do not come from the farms referenced in the W5 story.