Archive - Nov 13, 2014

Just as China is buying 'cheap' oil with both hands and feet, so Russia, according to the latest data from The World Gold Council (WGC) has been buying gold in huge size. Dwarfing the rest of the world's buying in Q3, Russia added a stunning 55 tonnes to its reserves, as The Telegraph reports, Putin is taking advantage of lower gold prices to pack the vaults of Russia's central bank with bullion as it "prepares for the possibility of a long, drawn-out economic war with the West." Bottom line: Russia bought more gold in Q3 then all other countries combined.

It appears the rumors are true. Islamic State is set to become the only 'state' to back its currency with gold (silver and copper) as it unveils the new coins that will be used in an attempt to solidify its makeshift caliphate. ISIS says the new currency will take the group  out of "the oppressors' money system."

Let's say there was a fellow here in Palo Alto named Brad. He told me that he had invented the world's perfect tiger repellant. He simply sprayed it on, and voila, no tigers would bother him.

Parents today carry a heavy burden. We need to counter state propaganda, protect our children’s minds from corporatism, while at the same time, do everything we can to teach them to think for themselves. We believe the solution to the corruption that surrounds us is to raise up a new generation of sovereign thinkers who aren’t tied down to any one philosophy, but are thinking minds instead.

Kuroda has fired the shot that looks likely to trigger the next phase of the crazy monetary experiment we’ve all been living in for the last five years. Unfortunately, the next phase is where things start to get nasty. Just because equity markets cheered the latest sugar rush he guaranteed them should not make smart investors lower their guard — quite the opposite, in fact. Colonel Kuroda has gone up-country into the Heart of Darkness, and all we can do is await the Apocalypse now.

Having told the world that it will not be undertaking system-wide rate cuts or stimulus - focusing more on idiosyncratic safety nets - last night's data from China is likely to have the PBOC frowning.  Fixed Asset Investment (lowest growth since Dec 2001) and Retail Sales (lowest growth since Feb 2006) missed expectations, but it was the re-slump in Industrial Production (after a small 'huge-credit-injection-driven' bounce in September) that is most worrisome as China's 2014 output is growing at its slowest since at least 2005. As Michael Pettis previously noted "China will be no different... growth miracles have always been the relatively easy part; it is the subsequent adjustment that has been the tough part." Of course, this is not the 'soft-landing' so many bulls have expected, which, if enabled by moar credit, as Pettis warned "will inevitably lead to a very brutal hard landing."

...Rwanda. And the biggest collapse in prosperity since 2009 has occurred in Greece - stunningly outpacing war torn, sanctioned Syria to the downside.

Gold dropped to new lows of $1,130 per ounce last week. This is surprising because it doesn’t square with the fundamentals. China and India continue to exert strong demand on gold, and interest in bullion coins remains high. In other words, it doesn’t add up.

Credit default schnapps anyone?

A bull market in the US Dollar is underway and its magnitude and duration are likely to catch everyone by surprise

First, they broke the capital markets. Then, the money-printing central-planners broke the housing market too. Here, in under 200 words, is a real-life case study of just how they did that.

The Silent Generation (people born between 1928-’45), finds itself in a 'sweet spot' but refuses to spend enough. America has a problem: the ' by far' richest group in the US doesn’t spend, while those who would like to spend, for instance to build a home and a family, are too poor to do it.

Because nothing signals confidence like an IMF economic projection (as we have shown here, here, and here most recently), we thought it worth pointing out the dramatically optimistic collapse of Greek unemployment that Lagarde's top men (and women) are projecting for Greece...

When it comes to the fair value of assets, especially cash-flow generating real estate, few are as qualified to opine as the man dubbed “World’s Richest Restaurateur”, Tilman Fertitta, chairman of Landry's Restaurants which counts among its properties such brand names as Morton’s, Rainforest Cafe, Bubba Gump Shrimp Co., McCormick & Schmick’s, Saltgrass Steak House, Claim Jumper, Chart House, The Oceanaire, Mastro’s Restaurants, Vic & Anthony’s Steakhouse and many more. Which is why his dire warning about the state of the "crazy" US real estate market, which he believes due for an imminent crash, are likely worth keeping in mind as all the panglossian permabulls see nothing but a 4th dead cat rebound ahead. That, and his take on inflation: "There is huge inflation going on right now."  Somehow we doubt he will appear on CNBC any time soon...

This is one of the consequences of the Fed’s decision to flood the land with free liquidity. When the cost of capital is near zero, and when returns on low-risk investments are near zero as well, or even below zero, investors go into a sort of coma. But when they come out of it and realize that “sunk capital” has taken on a literal meaning, they’ll shut off the spigot. Only then will drilling and production decline. As with natural gas, it can take years, and the price might plunge through a four-year low and hit a decade low – which would be near $40/bbl, a price last seen in 2009. The bloodletting would be epic.