Archive - Sep 2013

"There is nothing safe anymore, because the money-printing distorts all asset prices," is the uncomfortable response Marc Faber gives to Thai TV during this interview when asked for investment ideas. Faber explains how we got here "massive money-printing and ZIRP creates a huge pool of liquidity that does not flow evenly," as it washes from Nasdaq stocks to real estate to emerging markets and so on. Each time, "the bubble inflates and then is deflated as the capital (liquidity) floods out." The Fed, based on the doubling of interest rates since they began QE3 "has lost control of the bond market," Faber warns; adding that while he expects some "cosmetic tapering," the Fed members and other neo-Keynesian clowns will react to a "weakening US and global economy," and we will be a $150 billion QE by the end of next year, as the world is held hostage to US monetary policy.

Bubbles are on a lot of minds lately. Bonds. Housing. Stocks. Are any of these in a bubble? How do we decide? Both the stock market and the dollar price of gold are influenced by monetary creation. As long as money continues to be created, we should expect both to increase in price. There have been times in the past when the money blew up the stock market much more rapidly than gold, and if that were to happen again, there may be an arbitrage opportunity. Such does not appear to be the case today. In a time of monetary or credit creation, there are opportunities to preserve wealth through investments in productive enterprises as well as gold. Unfortunately, it is difficult to distinguish between enterprises that are truly productive and those which merely look productive as long as the credits keep flowing.

"The new normal..."

The Venezuelan government is in a bind. They realize that 'the people' will stand-by idly as the nation's currency is devalued, as inflation soars, and blackouts continue as food shortages grow...(and the stock market soars) but take away a critical personal care item and the riots will begin. As Yahoo Maktoob reports, Venezuela's leftist government said Saturday it temporarily seized a major toilet paper factory hoping that it can end troublesome shortages of the staple personal care item. "The temporary occupation of [the toilet-paper manufacturing plant] is aimed at verifying that toilet paper industry production, marketing and distribution" are all in line with state policies, Vice President Jorge Arreaza said on Twitter, without indicating how long the takeover would last. This action follows 'nationalization' of large farms amid President Maduro's claims that the White House is plotting the "collapse" of his government next month by sabotaging food, electricity and fuel supplies.

As suicide bombs devastate and terrorist attacks remain front-and-center in the headlines, we thought this worth sharing...

#BreakingNews: Al Arabiya sources: leader of al-Qaeda in Iraq and Syria has been killed

— Al Arabiya English (@AlArabiya_Eng) September 22, 2013

Al-Qaeda's Iraqi and Syrian branches merged this year to form the Islamic State of Iraq and the Levant, which has claimed responsibility for attacks on both sides of the border.

On Wednesday last the Fed surprised most people by deciding not to taper. What is not generally appreciated is that once a central bank starts to use monetary expansion as a cure-all it is extremely difficult for it to stop. This is the basic reason the Fed has not pursued the idea, and why it most probably never will. Fiat Money Quantity is now hyper-inflating. It currently requires a $3.6 trillion contraction of deposits to return this measure of currency quantity back to trend. This accurately sums up the problem facing the Fed. We must understand they are in an almost impossible position that dates back to their monetary response to the banking crisis. Not even Paul Volcker could have got us out of this one. Once the addiction to weak money hits this pace there is no solution without threatening to bring down the whole system.

While the outcome of the election from the perspective of "the grand coalition" is still too close to call, Exit polls make it clear that Merkels CDU/CSU party has won the election with 42.5% of the vote. However, there are some very interesting results that could be a problem for Europe's 'program-based' nations: GERMAN AFD TAKES 4.8% IN FEDERAL ELECTION, ZDF EXIT POLL SHOWS; GERMAN FDP TAKES 4.5% IN FEDERAL ELECTION, ZDF EXIT POLL SHOWS. So the anti-Euro party has more votes (nearly the 5% required to enter the Bundestag) than Merkel's current coalition partner FDP party which creates major uncertainty over the forming of a coalition (which took 3 weeks in 2005) - which as we noted seemed to priced into Greek stocks on Friday. The pirate party is projected to have 2.5% of the vote. If the anti-Euro AfD enters the parliaments, a "Grand Coalition" appears inevitable. However, if it does not cross the 5% threshold, Merkel may end up with an absolute majority in the Bundestag and will not nead a coalition partner.

UDPATE: Death toll rises to 68

UPDATE: Massive explosion reported at Kenya's Westgate Mall

Kenyan President Kenyatta this morning confirmed his nation's unrelenting "war on terror" reflecting that they have dealt with terrorists before and will again. Urging nations not to issue travel warnings, he reassured a nation that the attackers (believed to be the Somali militant group Al-Shabaab) in the upscale (frequented by ex-pats) Mall "are cornered." The slaying of at least 59 people makes this one of the worst attacks in Kenya's history and as the dreadful images below show, the terrorists appeared to have no limits. As news breaks of the army readying a rescue mission and confirmation that "many" civilians are still trapped, the situation is fluid to say the least.

Privacy has been traded in for corporate profits, governmental controls, spookily personalized ads, and harebrained hype about increased security

In a world in which all the matters is "scale", the ability to Martingale down on losing bets as close to infinity as possible (something which JPMorgan learned with the London Whale may not be the best strategy especially when one can't print money out of thin air), and being as close to the Fed's Heidelberg rotary printer as possible, it was expected that that "expert" of government backstops and bailouts, the Octogenarian of Omaha, Warren Buffett, would have only kind words for Ben Bernanke. But not even we predicted that Buffett would explicitly admit what we have only tongue-in-cheek joked about in the past, namely that the Fed is the world's greatest (and most profitable) hedge fund. Which is precisely what he did: "Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion. "The Fed is the greatest hedge fund in history,” Buffett told students yesterday at Georgetown University in Washington. It’s generating “$80 billion or $90 billion a year probably” in revenue for the U.S. government, he said.

One year ago New York had Superstorm Sandy. Now, with Typhoon Usagi closing in, Hong Kong is bracing for impact as the strongest storm in 34 years is set to hit the financial hub head on. As Severe Typhoon Usagi bore down on the city, the Hong Kong observatory issued a "severe threat'' warning. It hoisted the No 3 typhoon signal at 11.40pm yesterday and warned people in low-lying areas to take special precautions. “The water level may rise and cause flooding in the evening,” said Sandy Song Man-kuen, the observatory’s senior scientific officer. This happened as the Observatory issued a No 8 storm signal for Usagi.  The Hong Kong Observatory said that Usagi would make landfall to the east of Hong Kong and will skirt the territory at around 100km or less to the north later tonight and early tomorrow morning. Observatory senior scientific officer Mok Hing-yim warned of "astronomical" high tides and a storm surge. Mok said that if the typhoon signal No 8 was issued, Usagi would be the strongest typhoon to hit Hong Kong since Typhoon Hope in 1979, which killed 12 people and injured 260.

Let's see here: the party attacking the embassy of Assad-supporting Russia in Damascus is a) the Syrian government or b) the local Al Qaeda-funded Islamist fanatics and Qatari mercenaries, aka "rebels"? Surely a YouTube clip will promptly emerge, confirming it was a).

Since 2006, there have been a total of 18, 520 crashes, mini-crashes and flash-crashes or flash freezes (we have more names than we know what to do with) since that year. 

Why leave it to the imagination?

From the art of selling excess food stamp dollars at the end of each month, to JP Morgan profiting from the program as a line of business, Liberty Blitzkrieg's Mike Krieger introduces the following micro-documentary on the rise of our food stamp nation. Produced by Future Money Trends, this video covers it all, exposing the dismal and far-reaching consequences to society.