Archive - Oct 5, 2014

You don't need to go sing at a mega-fellowship church, pay a preacher, or call dial-a-prayer...What would Jesus really do in less than 2500 words.

How much higher can the dollar go? Betting on the Fed’s paper has been one helluva speculation... Read on for the supply and demand fundamentals of gold and silver.

Newly released images created from NASA satellite data illustrate the staggering effect the California drought has had on groundwater supply in the state. As Mashable's Patrick Kulp explains, the images show the amount of water lost over the past 12 years, with different colors indicating severity over time. “Nobody has any idea how disastrous it’s going to be,” Mike Wade of California Farm Water Coalition told the Associated Press, as RT reports a growing number of communities in central and northern California could end up without water in 60 days due to the Golden state’s prolonged drought. While California is bearing the brunt, experts note "We're seeing it happening all over the world, in most of the major aquifers in the arid and semi-arid parts of the world."

One of the main causes of the hyperinflation was the decision of the Zimbabwean government to give army veterans of its recent wars a big bonus. The promise was too much for the Zimbabwean economy to manage, so the government printed money... and lots of it.  Why is this relevant? Well, look at America. The chickens eventually will come home to roost for the US, just as they did for the poor Zimbabweans. The political pressure to print money is the same everywhere as are the laws of economic science.

UPDATE: *JMA ISSUES TORNADO WARNINGS IN TOKYO AREA, IZU ISLANDS, AS TYPHOON PHANFONE MAKES LANDFALL AT JAPAN'S SHIZUOKA, JMA SAYS

With 1 US airman dead and 2 missing, Super Typhoon Phanfone has already wreaked havoc in its doom-strewn approach of Japan, but as RIA reports, the Tokyo Electric Power Company (TEPCO), has revealed that the approaching typhoon could hit the damaged, decommissioned 40-year old nuclear power facility at Fukushima. Rather stunningly, The Japan Times reports tidal waves from the storm are likely to reach a maximum height of 26.3 meters or more (compared to the 2011 tsunami which reached a height of 15.5 meters when it hit the plant). Due to the expected 'mingling' of contaminated and Typhoon-driven ocean water, TEPCO admits 100 trillion becquerels of cesium to escape; Japan’s Nuclear Regulation Authority (NRA) plans to verify the accuracy of TEPCO's estimate and the "appropriateness" of countermeasures being taken.

Same old, same old. Treasury yields are lower (futures prices higher); USDJPY (and thus S&P futures) are higher (though 110.00 is once again offering notable resistance); and gold is getting 'handled' lower. The divergence between stocks and bonds from Friday's jobs number is holding for now but it is gold that has been smacked to $1183 - near a four-year low: $1180.50 6/28/13, then back to Aug 2010). Silver is down 1% to March 2010 lows. Despite US equity exuberance, Asia-Pac stocks (ex-Japan) are down 0.3%.

For the US, it’s now shooting fish in a barrel – but just for now. The three-pronged plan the Fed has started to execute is plain for everyone to see... And it will have the rest of the world begging for mercy.

"The Cabinet Office makes an assessment of the state of the economy based on the trend in the coincident CI, using a set of objective criteria. The August coincident CI is set to print negative mom. In this case, the Cabinet Office’s economic assessment will likely shift downward to “signaling a possible turning point” from the current level of “weakening”. According to the Cabinet Office, such a change in assessment provisionally indicates a likelihood that the economy has already fallen into recession. This is effectively akin to the government acknowledging that the economy is in recession."  - Goldman Sachs

While CNBC's Bob Pisani prevaricates on low "high" volume rally days and "the important things," ahead of Q3 earnings and a horde of hungry commission-takers explain to a gullible public how fundamentals are strong (ignoring entirely the massive manipulation buybacks and financial engineering) and earnings will confirm the equity market's wisdom any day now; we thought it worth a glance at the dismal evolution of earnings expectations for Q3. Since the start of July, S&P 500 Q3 earnings expectations have collapsed from 11.0% to just 6.4% with 9 of the 10 sectors lower and Consumer Discretionary now expected to see negative growth. But... that's probably not the important thing, right?

"What people underestimate is that what's at stake is the entire credibility of the rules," warns one EU official as The WSJ reports, is preparing to reject France’s 2015 budget, that would be the biggest test yet of new powers for Brussels that were designed to prevent a repeat of the eurozone’s sovereign-debt crisis. With the looming handover to former French FinMin Pierre Moscovici (fox, henhouse?) it appears the current European Commission will not stand for Current French FinMin Sapin's plan that would run a budget deficit of 4.3% of GDP next year (far greater than the 3% deficit it had previously promised) put France’s budget in "serious noncompliance" with the new EU rules and risking sanctions of as much as 0.2% of GDP. The credibility of Brussels' new powers threatens to be seriously undermined if big countries such as France and Italy are able to flout the new rules as "it’s not like they will try - and fail; they're actually planning not do it," another EU official said.

What could go wrong?

The divergent prospects for growth, interest rates and monetary policies between the euro zone and the United States has led to a completely normal depreciation of the euro against the dollar, despite this depreciation being limited by the euro zone’s external surplus. Most observers are exuberant about this depreciation of the euro, but Natixis asks, faced with imports that the euro zone cannot do without (commodities, components manufactured outside the euro zone due to the segmentation of production processes), is it certain that it has a positive effect on euro-zone growth? Given the sensitivity of the euro zone's foreign trade (in volume terms and in terms of prices) to the euro's exchange rate, and at the historical link between the relative growth of the euro zone and the euro’s exchange rate, Natixis (devastatingly for the recovery-enthusiasts) find that the effect of a depreciation of the euro on euro-zone growth is very minor at best and, at worst, zero.

Today, we now have a financial system that is even more leveraged than in 2007… backstopped by even less high quality collateral. So when the panic hits, the selling pressure will be even MORE extreme.