Archive - Nov 3, 2014 - Story

The Bank of Japan's surprise expansion of financial stimulus strikes me as the monetary equivalent of Pearl Harbor --not in the sense of launching a pre-emptive war (though the move does raise the odds of a global currency war), but in the sense of a leadership pursuing a Grand Strategy to the point of self-destruction because they have no alternative within their intellectual and political framework. Trying to "fix" a sclerotic, inefficient state-cartel economy by boosting inflation--the ultimate goal of Japan's Monetary Pearl Harbor-- is a self-liquidating path to destruction.

After initially jerking higher after Saudi Arabia released its new 'lower-prices-for-the-US' strategy, it appears the market began to realize that in fact - as we warned - Saudi Arabia may be willing to accept prices "lower for longer." WTI futures are trading below $78.50 - the lowest since June 2012 (and its dragging Trannies lower today)...

If "work set you free" in the Nazi concentration camps of WWII, then it appears in this consequence-less society in which we live, stealing is the new normal. As CBS reports, 5 years after a Swedish neo-Nazi was found gulity of stealing the symbolic concentration camp sign from Auschwitz; a wrought-iron gate bearing the Nazis' cynical slogan "Arbeit macht frei," or "Work sets you free," has been stolen from the former Dachau concentration camp, police said Sunday. "The theft of such a symbolic object is an offensive attack on the memory of the Holocaust," said Israel's Yad Vashem Holocaust memorial.

As Janet Yellen prepares to meet with President Obama this morning for the first time, it appears The Dallas Fed's Richard Fisher has planted a rather uncomfortable tape bomb for her to explain:

FISHER: QE3 WAS A GIFT TO THE RICH

So right before the Midterm elections, a week after Janet Yellen discussed inequality, she is summoned to meet with The 'fair' President to explain how her policy is keeping Obama's dream alive?

It appears, just as we warned two weeks ago, that the 'dumping strategy' designed to punish Obama's nemesis Putin could have morphed into a Saudi Arabian strategy to keep its foot on the neck of the US Shale Oil industry. In an awkward headline for mainstream media to explain, The Kingdom has raised prices of its Arab Light crude exports to Asia and Europe but cut prices to the USA significantly, potentially pressuring domestic suppliers with foreign 'cheap' imports. While not a primary course of US oil, we suspect the signaling of this move is more worrisome for Shale capex  (especially as we noted Saudi Arabia can survive 7.9 years at lower prices) Forget currency wars, meet oil wars...

Another month, and year, another confirmation that under a centrally-planned Central Banking put regime, there is simply no need for the 2 and 20 industry.

The trend is your friend... until it becomes a Venezuelan hyperinflation melt-up...

Money-printing turns out to be the grift that keeps on giving. The US stock markets retraced all their October jitter lines, and bonds plumped up nicely in anticipation of hot so-called “money” wending its digital way from other lands to American banks. Euroland, too, accepted some gift inflation as its currency weakened. The world seems to have forgotten for a long moment that all this was rather the opposite of what America’s central bank has been purported to seek lo these several years of QE heroics — namely, a little domestic inflation of its own to simulate if not stimulate the holy grail of economic growth. Of course all that has gotten is the Potemkin stock market, a fragile, one-dimensional edifice concealing the post-industrial slum that the on-the-ground economy has become behind it.

Confused about futures trading? Uncomfortable with margin-ing, leverage, and just how much money you can make (or lose) trading derivatives? Have no fear, in a little under 55 seconds, these five- and six-year olds succinctly summarize the meaning of money and investing in corn, equity, and cocoa futures...

"Perhaps sooner rather than later, investors must recognize that modern day inflation, while a necessary condition for survival, is not a sufficient condition for increasing wealth at a rate necessary to satisfy future liabilities associated with education, health care, and a satisfactory retirement. The real economy needs money printing, yes, but money spending more so, and that must come from the fiscal side – from the dreaded government side – where deficits are anathema and balanced budgets are increasingly in vogue. Until then, deflation remains a growing possibility – not the kind that creates prosperity but the kind that’s the trouble for prosperity."

With the Swiss gold stored at the Bank of Canada, now having been transferred out of the Bank of Canada’s Ottawa vault to an unknown location, the Swiss public would be wise to question the SNB on this move. The Swiss gold stored at the Bank of England in London seemingly being ‘actively managed’ one of the world’s largest centres for unallocated gold trading, the Swiss public would also be wise to enquire on this issue. And with significant historical quantities of Swiss gold that were stored with the US Federal Reserve Bank in New York no longer there after the SNB seemingly brought their US vaulted gold holdings to zero, the Swiss public need to question why these particular holdings were targeted for sales from 2000-2005 and not domestically held gold.

The Millennials (one of the biggest generations in US history) are just not getting with the status quo program. As we detailed previously, with lower credit scores, less disposable income, and a soaring number of people living with their parents; so it should be no surprise that The National Association of Realtors (NAR) today admitted that first-time homebuyers plunged to the lowest level in 27 years. The blame - of course - rather than low/no-growth fiscal policies, student debt servitude, and inequality-driving cheap-funding monetary policy, is price comnpettion from 'investors' and too "stringent credit standards," perfectly mirroring FHFA's Mel Watt's Einsteinian insanity desire to dramatically ease lending standards and slash minimum down-payments (as we noted previously). Perhaps NAR accidentally stumbles on the biggest reason no one is buying in their profiling: the typical first-time buyer was 31-years-old, while the typical repeat buyer was 53 - smack in the middle of the Millennial collapse.

US manufacturing both declined (PMI) and rose (ISM) in October as the divergence  between the two soft-survey-based data streams is as ridiculous as it was in the second half of last year. ISM printed a cycle high 59.0 (highest since March 2011) smashing the 56.1 expectations (the biggest beat since July 2013). While the headline print was exuberant, New orders fell, as did new export orders. Construction spending fell for the 2nd month in a row, dropping 0.4% against expectations of a 0.7% rise.

Moments ago, GM was pleased to report that its dealers delivered 226,819 vehicles in the United States in October leading to "the company’s best October sales in seven years." But it could have been much worse if GM had not resorted to its favorite sales "boosting" gimmick: channel stuffing. Indeed, as GM reported, in October, total units at dealer lots, rose to 792,489, or a whopping 94 days supply, up from 753, 928 (81 days) in September, and up a whopping 8.9% from the 728K in October of last year, when, again, sales were only 0.2% lower.  This was the biggest one month jump in "dealer stuffed" vehicles since November of 2013.