Archive - Jan 20, 2014

Curious which are all the various import trade routes which China uses to satisfy its relentless thirst for oil? Here they are...

Pure speculation, but interesting information. 

This morning's apparent U-turn in US-Iran relations - when the US demanded the UN rescind Iran's invite to the Syrian peace conference having somewhat instigated their invitation in the first place - is a little confusing for some. However, as OilPrice's Joao Peixe points out, reports are emerging that Iran and Russia are in talks about a potential $1.5 billion oil-for-goods swap that is sure to upset the powers that be in Washington.

"As has been well documented, I smoked pot as a kid, and I view it as a bad habit and a vice, not very different from the cigarettes that I smoked as a young person up through a big chunk of my adult life. I don’t think it is more dangerous than alcohol,” Obama told the weekly magazine. The president said pot was actually less dangerous than alcohol “in terms of its impact on the individual consumer.”

Despite record levels of unemployment across Europe (most specifically among the youth), record high (and surging) levels of loan delinquencies, and collapsing credit creation, the leaders of the EU continue to peddle their own brand of dis-information and willful blindness. While UKIP's Nigel Farage tongue-lashings are normally enough, EU's Barroso this morning unleashed the following:

*EU'S BARROSO SAYS ECONOMIC GROWTH 'SLOWLY RETURNING'; SAYS EU AT TURNING POINT IN CRISIS

However, as the following chart of earnings estimated for European firms shows, there is absolutely none, zero, nada sign on a 'turning point' and, as we have noted previously, unless the EUR weakens significantly, Europe will rapidly dip back into re-re-recession once again.

Tech isn’t exactly booming, but that hasn’t kept “valuations” of tech startups from being pushed into the stratosphere, for the benefit of an elite club.

Next time you cry over your paycheck or you scrimp and scrape to find the extra few dollars to finish the month, remember that admittedly money doesn’t grow on trees…

Judging by the collapsing Greek yields, which at this rate may drop below US bonds soon enough, the Greek economy has never been stronger. Sadly, manipulated bond levels driven by yet another bout of pre-QE euphoria (suddenly the conventional wisdom is that the ECB will conduct QE in a few months as first explained here in November) no longer reflect anything besides a massive liquidity glut and momentum chasing lemmings. Alas, as usual the reality on the European ground is much worse. The latest example comes from the Greek Public Power Corporation which has reported that Greek households and corporations are finding it increasingly difficult to pay their electricity bills. In total, debts to the power utility from unpaid bills currently amount to some €1.3 billion and growing at an average rate of €4 million per day. Also known as the Grecovery.

There are definite limits to what QE can do. Now that even Bill Dudley and other Fed officials admit that the Fed doesn’t understand QE, it’s only a matter of time before the market begins to crumble.

"It's dangerous to be short still, but we might be building toward a moment where the market becomes quite vulnerable," warns Bill Fleckenstein who is finishing up the documentation on a new short fund he is about to start marketing. With the slowing growth of the Fed balance sheet, over 70% of the S&P's gains since 2011 from hope-driven multiple-expansion alone, bond and equity market sentiment at extremes, and (as Goldman warned) valuations anything cheap; it is hardly a surprise that, as Reuters reports, after years of hiding under their desks, short sellers are re-emerging - slowly. Whether outright short or long/short funds, the market-share of this corner of the business bottomed at approximately 25% in 2013, but in the last weeks, several S&P 500 companies have seen large increases in shares borrowed for short bets; and the "tide might be turning."

As we have discussed numerous times, India's ban and tariffs on gold imports (supposedly to protect their current account balance) is having numerous unintended consequences. From flights full of gold-laden passengers entering the country,  to trying to roll-back centuries of tradition surrounding Indian weddings, the capital control efforts are back-firing as the smuggling epidemic spreads. The foolishness of this 'control' is also spreading as Pakistan has noticed the surge in smuggling, concerned at a steep increase in import duties on gold in a "neighboring country," and has imposed a 30-day ban on gold imports to curb the 'trade'.

If ever a chart provided unequivocal proof the economic recovery storyline is a fraud, the one below is the smoking gun.

While momentum has been with the hopes that Iran has gone full-peace-tard and following Iran's foreign ministry stating earlier that it would attend the conference on Syria, known as Geneva II; senior US officials have stepped in...

• *IRAN NOT ELIGIBLE FOR SYRIA CONFERENCE, US OFFICALS SAY: AP
• *U.S. SAID TO WANT UN TO RESCIND IRAN INVIATION TO SYRIA TALK
• *IRAN FAILS TO MEET REQUIREMENTS FOR GENEVA II TALKS:US OFFICIAL

After practically inviting them, the US demands that the UN rescind the invitation to Iran to attend since it "falls well short" of what is required.

A scatterplot of the gold price (in USD) vs the USDX index highlights provides informative hyperbolae (or isoquants) that appear to be of some importance in constraining the evaolution of the gold price over time.

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