Archive - May 2013

Argentina's president Kirchner, a keen observer of recent events in Cyprus, has figured out a way to kill two birds with one stone, namely attempt to put an end to tax evasion, and fund the capex of the recently nationalized state oil company YPF (now that its former owner, Spainish Repsol, is less than keen to keep investing in its former Argentine subsidiary). To do that she will present the local tax-evading population (pretty much anyone with any disposable income and savings) with a simple choice: buy a 4% bond to fund YPF "growth" or go to prison.

If England does not wake up and recognize what is happening then it will be Neville Chamberlin all over again. Appeasement is never a good answer and today no war is threatened just financial domination. Over time, if Britain remains in the European Union, they will get pushed down into the mud, lose their ability to govern themselves, watch as their financial institutions get trampled by Frankfurt. The Germans will force them into a space presently occupied by Greece, Slovenia and Cyprus. Retribution for two World Wars will finally be won in Berlin.

There are signs that China's economy may have a short-term uptick but that shouldn't detract from what remains a poor long-term outlook.

The words "Shit Heel" come to mind.

The dollar rallied in the second half of last week, but looks set to consolidate first before extending the rally.  The yen was not the weakest major currency.  That dubious honor goes to the Australian dollar.  

The almighty dollar is looking less mighty these days. By almost every measure, the purchasing power of the US dollar is in precipitous decline.

It is a fair bet that one way or another, the current generation of young people will be unwilling and/or unable to pay for Social Security and Medicare as they presently stand. Of course, Western Europe has the same problem and President Hollande of France recently got a whiff of what is coming from an open letter addressed to him by a 20-year old student named Clara G... "I want to go to a country where there is growth, where wages are rising, where being rich is not a deadly sin, a country in short where the individual and the society have confidence that tomorrow will be brighter than today." Developed nations with deteriorating demographics will have a big problem if large taxpayers decided to move away to lower tax jurisdictions. Clara’s letter suggests that an exodus by the young would be just as damaging, indeed probably more damaging.

Gold bears are coming out of the woodwork to declare gold dead. Santiago Capital's Brent Johnson wonders where they have been for the last 12 years and reflects on the reality of why one should hold the precious metal; putting the recent weakness in its proper context.

The Bernanke Chicago speech became little more than a side show Friday. He did say the Fed was keeping a watchful eye on yield risk-taking given ZIRP. He’s a little late to that observation methinks.

Yesterday, the rumor turned out to be a joke. Today, there was no rumor, but as we warned four hours ago, it was only a matter of time. Less than four hours later, the time has come, and Jon Hilsenrath's "Fed Maps Exit from Stimulus", conveniently appearing after the close, has just been released.

If the greatest trick the devil ever pulled was convincing the world asset bubbles don't exit, the next question is who is QE Soze?

The Obama administration has come out in support of the idea of exporting U.S. natural gas. This stance is counterproductive and shortsighted, and if followed, it will prove harmful to domestic manufacturing (i.e., value generation) and to future generations of Americans. While exporting natural gas would certainly prove to be an economic boon for a very select minority of companies and individuals, it makes no sense from an energy standpoint and undermines our national interests. All it will do is enrich a few while boosting prices for all domestic consumers and shortchanging the energy and environmental inheritance we pass along to our children. The time has come to give greater weighting to energy matters than to economic and political desires. To continue to be energetically wasteful at this time in history, when so much data is telling us that the effluent of our activities is measurably altering our support systems, is beyond embarrassing.  It's tragic.

During an interview with The Globe and Mail, 'Gloom, Boom, and Doom's Marc Faber unleashed some awful truthiness about gold "I buy gold every month", real estate "bubble territory", and the likelihood of a crash in smoke-and-mirrors-like asset markets - "In the 40 years I’ve been working as an economist and investor, I have never seen such a disconnect between the asset market and the economic reality... Asset markets are in the sky and the economy of the ordinary people is in the dumps, where their real incomes adjusted for inflation are going down and asset markets are going up... Something will break very bad."

China may or may not be building empty cities any more, but when it comes to the buildings it does, ahem, erect, it appears that the communist regime is either running out of ideas or is taking the symbolism of the skyscraper just a little too seriously. Behold the building that will house the new Beijing offices of the People's Daily, the official paper of the China Communist Party...

Japan should serve as a lesson to central planners around the world. Japan’s stock market/ real estate bubble burst in the early ‘90s. Since that time Japan has launched NINE QE efforts equal to roughly 25% of its GDP. And GDP growth has worsened despite these efforts from 2% to 1%. Ditto for employment.