Archive - Jan 2015

Left-wing anti-EU party Syriza has extended its lead over incumbent Nea Dimokratia (ND) to 7 percentage points in the polls ahead of tomorrow's crucial Greek election. As Keep Talking Greece reports, To Potami and Golden Dawn (the neo-Nazi party that is facing charges for being a "criminal organization") are running 3rd with 6-7% of the vote (Syriza 33.5%, ND 26.5%) and with 20% admitting they had changed their opinion about which party to vote for in the pre-election period, it appears ND incumbents have taken up the "Scotland" strategy - fearmongery. Speaking on Greek TV, just 48 hours before the elections, ND-candidate Sofia Voultepsi implied that if Syriza wins the elections and forms a government on Monday Greeks will run out of toilet paper... and with JPMorgan noting that deposit outflows hit EUR8bn last week (double the previous 2 weeks combined), the "bank run" could easily morph into Venezuelan "toilet paper runs."

In 55BC, Cicero stood before the Senate of Rome (warning of its looming demise), spoke of the “arrogance of officialdom” and the more one studies going ons throughout history, the clearer it becomes – the story remains the same, only the actors change - history repeats because the passions of man never change. Those who may grudgingly support the ECB stimulus in the hope that it will buy time for governments to enact structural overhauls, keep praying that politicians will push aside their own personal self-interests for once and focus of the interests of the people. Such wishful thinking is foolish since history demonstrates that only takes place when the system collapses. People who do hold to this view are also worried that looser monetary policy may work against structural measures. The European Central Bank’s stimulus diminishes any incentive for governments to reform. The policy makers and specialists at Davos were divided over the effect of even that program; but where do these people get off assuming they have the ability and right to manipulate the world?

Over the past 48 hours, the world has been bombarded with a relentless array of soundbites, originating either at the ECB, or - inexplicably - out of Greece, the one place which has been explicitly isolated by Frankfurt, that the European Central Bank's QE will benefit everyone. Setting the record straight: it won't, and not just in our own words but those of JPM's Nikolaos Panigirtzoglou, who just said what has been painfully clear to all but the 99% ever since the start of QE, namely this: "The wealth effects that come with QE are not evenly distributing. The boost in equity and housing wealth is mostly benefiting their major owners, i.e. the wealthy." Thank you JPM. Now if only the central banks will also admit what we have been saying for 6 years, then there will be one less reason for us to continue existing. 

If earnings are the "mother's milk" of equity market returns, then stocks are about to turn sour (that is of course if fundamentals have anything whatsoever to do with it anymore). As we detailed previously, Q4 is shaping up to be the worst in years for earnings, and with next week seeing the bulk of names (36% of the S&P 500) reporting (including many of the biggest belwethers and major energy firms), we suspect the 2014 EPS chart below (and the already collapsing consensus expectations for 2015 earnings) will continue to plummet.

Then we take Berlin...

Just as people enjoy the presumption of innocence in a criminal trial, property owners never convicted or even charged with a crime should not be presumed guilty in civil asset forfeiture proceedings. The Civil Asset Forfeiture Reform Act of 2000 has proven inadequate for curbing abuses, as countless Americans across the nation, having done nothing wrong, continue to lose their homes, businesses, and, sometimes, their very lives to the aggressive, acquisitive policing that this law encourages. Civil asset forfeiture is a big challenge. While the Justice Department has recently stepped up to limit the scope of this problem, it is time for Congress to act.

Since last May (and likely long before) when the topic of "de-dollarization" was first uttered in official circles (and not just tin-foil-hat-wearing blogs), the rest of the world (un-isolated as they are) has been warming to the idea that perhaps - just perhaps - it is time to de-dollarize (more or less depending on the despotic region in question). From currency swap agreements to bi-lateral trade agreements to selling US Treasuries and greatly rotating USD reserves into gold, the world's nations (small and large) appear less and less comfortable holdings dollars in this tempestuous world. Among the supporters of that first "de-dollarization" meeting were China and Iran and while the former continues to work down its exposure, the latter - Iran, according to Tasnim news agency, has almost entirely eliminated USDollars from its reserves and is no longer using dollars in foreign trade. De-dollarization complete...

Someday, maybe, these central banks will find that secret formula that unlocks the commanded utopia from its monetary prison, but I think it more like what led to the end of the first Gulf War, where continued air raids upon Iraqi positions amounted to destroying rubble. As Colin Powell put it, “we were bouncing rubble with billion-dollar missiles.” That seems to be a fitting, paraphrased description of the European state of monetarism, bouncing economic rubble with trillion-euro debt missiles.

Yesterday the main separatist leader in the rebellious Donetsk region, Alexander Zakharchenko, vowed to push Ukrainian soldiers out of the area and said insurgents would not take part in any more cease-fire talks. Another rebel went even further, saying they would not abide by a peace deal signed in September. The separatists said rebel fighters went on the offensive to gain more territory and forestall a Ukrainian attack. He declared they would push government troops to the border of the Donetsk region and possibly beyond. Which, according to the latest news, is precisely what they have done. As AP reports, indiscriminate rocket fire slammed into a market, schools and homes Saturday in the eastern Ukrainian city of Mariupol, killing at least 21 people, authorities said. Ukraine's top rebel leader announced that an offensive had begun on the strategically important port.

I have told you the US dollar was going up for months.  Some mocked me.  Others insulted me.  So what?  I tell you the dollar's bull market remains intact.  

So who pays? Someone has to, you can not just create money out of thin air. The answer is “we do, you and I”, in the form of a devalued: currency, diminished savings and devaluing pensions.

You are witness to possibly the greatest economic slight of hand ever perpetuated on a people, when the long gaze of history looks at this decision, deflation fears will not be part of the final analysis, arrogance, stupidity and theft will be.

Yesterday the European Central Bank acknowledged that the currency it manages is being sucked into a deflationary vortex. It responded in the usual way with, in effect, a massive devaluation. Eurozone citizens have also responded predictably, by converting their unbacked, make-believe, soon-to-be-worth-a-lot-less paper money into something tangible. They’re bidding gold up dramatically.

The face of America's unauthorized offshore wars has changed over the years, and these days it can most often be found watching the infrared screen of a terminal in some heavily-guarded air force base on US soil, operating heavily-armed, remote-controlled drones thousands of miles away, tasked with executing a lethal mission which usually involves one or more "collateral" casualties. For almost five years, Brandon Bryant was one of those faces, and worked in America's secret drone program bombing targets in Afghanistan and elsewhere. He was told that he helped to kill 1,626 people, but as time went by he felt uneasy with what he was doing. He found it hard to sleep and started dreaming in infra-red.

No matter what the politicians say about how great America is and how we, as a people, will always triumph, the fact is that the nation seems to be imploding. Despite the dire state of our nation, however, you can rest assured that none of the problems that continue to plague our lives and undermine our freedoms will be addressed by our so-called elected representatives in any credible, helpful way, and certainly not during a State of the Union address.

"War" is back on the minds of the world's richest men (and women). The Global Risks Landscape, a map of the most likely and impactful global risks, puts forward that, 25 years after the fall of the Berlin Wall, “interstate conflict” is once again a foremost concern. As The World Economic Forum notes, these multiple cross-cutting challenges can threaten social stability, perceived to be the issue most interconnected with other risks in 2015, and additionally aggravated by the legacy of the global economic crisis in the form of strained public finances and persistent unemployment. The central theme of profound social instability highlights an important paradox that has been smouldering since the crisis but surfaces prominently in this year’s report. Global risks transcend borders and spheres of influence and require stakeholders to work together, yet these risks also threaten to undermine the trust and collaboration needed to adapt to the challenges of the new global context. Rather ominously, The WEF concludes, the world is, however, insufficiently prepared for an increasingly complex risk environment.