Archive - Jun 2013

"Even though the consensus is convinced that the gold bull market has ended, we remain firmly of the opinion that the fundamental argument in favor of gold remains intact. There exists no back-test for the current financial era. Never before have such enormous monetary policy experiments taken place on a global basis.

If there ever was a need for monetary insurance, it is today."

That is a truly staggering collapse in incomes. The last time we say anything even close to this was in the third quarter of 2008.  

And news from Mars...

In a somewhat surprising move (given the proxy war under way), Russia has evacuated all military personnel from its small naval base in Syria. "We have neither servicemen nor civilians in Syria anymore," the newspaper Vedomosti reported quoting an unnamed Defense Ministry employee, "or Russian military instructors assigned to units of the Syrian regular army, for that matter." As The Washington Post reports, a 16-ship Russian naval task force in the eastern Mediterranean remains on post, reports said. Cyprus has made its ports available to the Russian fleet if needed, but the base at Tartus (that we described in detail here) has been Russia’s only foothold in the Middle East. A person with knowledge of the Kremlin’s decision told Russia’s RT television channel that the withdrawal reflected concerns about the risks posed by Syria’s ongoing civil war, as well as the fear of an incident involving the Russian military that could have larger consequences.

The Consumer Metrics Institute is generally a pretty subdued bunch, as befits their job interpreting economic statistics for money managers and other economists. But lately they’ve been increasingly vocal about the farce we are witnessing: "From time to time we may quarrel with the quality of the BEA’s deflaters. And frankly we may even find that at face value the lackluster numbers amount to nothing more than a sham “recovery.” But the most shocking part of this report is glaringly obvious from the real per capita disposable income numbers: all of the unprecedented fiscal and monetary stimulus has left American households materially worse off than they were two years ago."

Physical demand remains robust internationally especially in China and India where premiums are moving higher again.  In China, physical demand remains robust and premiums remain at elevated levels near $35/oz. In India, premiums charged shot to $20 an ounce overnight from $8-$10 on Tuesday.

Anyone expecting NY Fed's Dovish "edible iPad hedonic adjustments" expert Bill Dudley would join the hawks in being an uber dove, just hot spanked:

• DUDLEY REITERATES QE TAPER MAY BE APPROPRIATE LATER IN 2013
• DUDLEY REPEATS UNEMPLOYEMENT MAY BE ABOUT 7% AT QE BUYING END... and higher when Tapering begins?
• DUDLEY SAYS REDUCING QE BUYING WOULDN'T MEAN POLICY TIGHTENING
• DUDLEY SAYS FED WILL PROBABLY KEEP MOST ASSETS FOR A LONG TIME
• DUDLEY SAYS `MEASURED' QE TRIMMING MAY OCCUR IN 1ST HALF 2014

Welcome the latest rabbit hole in Bernanke's centrally-planned bizarro world, where hawks are doves, and doves are hawks.

The late 20th century was a jam-packed time for stock-market crashes that would change, shape and alter our lives in so many ways.

Following yesterday's 'Queerbait' comments and pleading 'Da Fif', we suspect more of the same to follow today as the House Ways and Means committee continues its investigation into the IRS targeting practices at 10amET.

"If the Fed was removing stimulus because of a desire to reduce the risk of asset bubbles then we'd have sympathy but we would argue that maybe the time to do this was around 15 years ago. To start conducting policy in this manner in 2013 after years of rolling bubbles and an extremely high global debt burden is quite dangerous." Deutsche Bank

Gold premiums doubled in India on Wednesday as suppliers struggled to meet surging demand after a ban on consignment imports, even as futures prices fell to their lowest in more than a month. As Reuters notes, India, the world’s biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewelers with lower working capital to source supplies. The government also raised the import duty to 8 percent in May to keep a lid on the surging current account deficit." There may be some demand from jewelers for raw material,” said Bachhraj Bamalwa, former chairman of All India Gems and Jewellery Trade Federation, adding that premiums charged on London prices shot to $20 an ounce on Wednesday from $8-$10 on Tuesday. “We are unable to supply, though there is demand... we give deliveries after 2-3 days,"

There was little of note in today's May Personal Income and Spending report (aside from the now-traditional backward looking revision of Q1 data): personal spending was expected to come increase 0.3% in May, and so it did, up from a revised 0.3% drop in April. Income, however, spurted by 0.5% in the month, more than double the expected 0.2%, up from an adjusted 0.1% increase in April. The income rise was as a result of a $24 billion increase in wages, and a $31 billion rise in income on assets (interest and dividend income).  Finally $19.4 billion in personal current transfer receipts (government generosity) completed the picture of why Americans' incomes rose in May. However, despite this beat in income, spending was in line with expectations, and following the revisions of January-April data, the May 3.2% savings rate was the highest reported so far in 2013. For the Keynesians out there, this is hardly the strong indicator of consumer spending they have been looking for.

The last few weeks have seen initial claims somewhat flatline stalling the downtrend of the previous six months (even as today's print dropped 9k from the previous week's revised data). Today's very small miss (346k vs 345k expectations) is the second week in a row. While delayed a week, 39 states saw an improvement in claims while 14 saw claims rise but it is most notable that California saw over 15,300 layoffs in the services industry, not exactly the sign of a strengthening recovery and the trickling down wealth effect (especially given the pace of real estate gains on the West Coast).

Another month, another update on the inefficiency of Cypriot capital controls, where following the latest release by the central bank on the May level of deposits in the banking system, we learn that total cash holdings in Cyprus banks dropped by another EUR 1.4 billion in May to EUR55.9 billion, and 23% lower from the same month last year. And with ongoing and unchecked deposit flight continuing, with EUR 14 billion in cash pulled or confiscated since the start of the year, one can see why the administration and the president are about to throw in the towel and demand, this time for a real, a much bigger bailout for Cyprus to plug the ever bigger gaping liquidity hole in the local banks as otherwise all that good money chasing bad will be for nothing. In the meantime, expect deposit flight to continue as anyone with half a brain can finally see the writing on the wall, if only with a slight delay and following much personal losses.

• Hilsenrising interest rates Business Feels Pinch of Swift Rate Rise (WSJ)
• Yellen Betting Defies 100-Year Jinx of Fed No. 2 Never Elevated (BBG)
• No sign of cyber leaker Snowden on flight to Cuba (Reuters)
• Back to the Future 2 is finally coming: Honda Sees ‘Flying Sports Car’ Making Profit by Decade’s End (BBG)
• Europe’s Richest Person Kamprad to Move Back to Sweden (BBG)
• Li’s Shock Treatment to China Lenders Evokes Ex-Reformer (BBG)
• In India, Gold-Related Shares Melt Down (WSJ)
• Citigroup Opens in Iraq to Tap $1 Trillion of Oil Spending (BBG)
• France warned on budget deficit  (FT)