Archive - Jul 2014 - Story

To complete the French triple whammy offensive against the US Dollar this weekend (first, French central banker Noyer suggesting de-dollarisation; second, French oil major Total's CEO "seeing no reason for the Petrodollar"), French finance minister Michel Sapin says "now is the right time to bolster the use of the euro" adding, more ominously for the dollar, "we sell ourselves aircraft in dollars. Is that really necessary? I don’t think so." Careful to avoid upsetting his 'allies' across the pond, Sapin followed up with the slam-dunk diplomacy, "This is not a fight against dollar imperialism," except, of course - that's exactly what it is... just as it was over 40 years ago when the French challenged Nixon.

Now that Obamacare has been enacted, Americans across the nation are seeing their health insurance bills spiking, leading to what has been a documented slide in full-time hiring, a drop in consumer discretionary spending, not to mention stagnant and declining real wages. In short: a broad economic contraction (yes, yes, who could have possibly foreseen this). But how is it that insurers set their prices? As Bloomberg explains, insurers are calculating what to charge for health plans in 2015, which is no simple task. Actuaries can’t easily forecast how often the millions of new Obamacare enrollees will go to a doctor. New federal rules and expensive drugs will also increase costs. Wrong guesses could wipe out profits. Here is a quick and dirty way to understand why premiums are going up.

It's a good time to be in Iraq, if you're a crazed Muslim zealot bent on creating a caliphate, that is. As Mark Fiore explains in a format even the most iPad-addicted youf of today, Iraq is suddenly back on everyone's radar now that ISIS is taking over large chunks of that formerly-occupied nation. Here, in 120 seconds, is how they did it (and how you can too)... "now, sit back, relax, and enjoy a miserable theocratic existence..."

It should come as no surprise that when Gallup recently conducted a poll asking residents to rank if their state is the "worst possible to live in" a whopping 25% of its residents, by far the most of any states, responded Illinois. Which were the other "worst possible" states? The table below ranks them all.

"The system we have now is one in which the Fed decides, through a Politburo of planners sitting in Washington, how much liquidity is necessary, what the interest rate should be, what the unemployment rate should be, and what economic growth should be. There is no honest pricing left at all anywhere in the world because central banks everywhere manipulate and rig the price of all financial assets. We can’t even analyze the economy in the traditional sense anymore because so much of it depends not on market forces, but on the whims of people at the Fed."

The reputation of bearish-biased research boutiques is set to soar following the latest fiasco involving Spanish mid-cap tech company Let's Gowex (GOW) which a week ago was the subject of a research report by Gotham City Research and its Twitter frontliner, @LongShortTrader. In the report, Gotham predicted that "Gowex shares are worth €0.00 per share." Its conclusion: "the shares will be suspended, just as Pescanova’s shares were suspended." Needless to say at the time Gowex vehemently denied the report saying all its allegations were false. Gotham was right and hours ago the CEO admitted the company which as recently as a week ago had a $2 billion market cap was nothing but a complete fraud.

The USA is fast running out of friends to support its 'exorbitant privelege'. Having alienated the Germans over NSA-eavesdropping, 'boomerang'd the Russians into de-dollarization, tariffed and quantitatively eased China into diversification, and finally 'punished' France into discussing the dollar's demise; it appears no lessor person than the CEO of Total (the world's 13th biggest oil producer and Europe's 2nd largest), believes "There is no reason to pay for oil in dollars." Clearly, based on Christophe de Margerie's comments, that we have passed peak Petrodollar.

...a not so far off future in which martial law, economic collapse, and the destruction of civil liberties stood imminent...

The selloff last year was a desperate warning about the lack of resilience in credit and funding. That repo markets persist in that is, again, the opposite of the picture Janet Yellen is trying to clumsily fashion. Central banks cannot create that because their intrusion axiomatically alters the state of financial affairs, and they know this. It has always been the idea (“extend and pretend” among others) to do so with the expectation that economic growth would allow enough margin for error to go back and clean up these central bank alterations. That has never happened, and the modifications persist. Resilience is the last word we would use to describe markets right now, with very recent history declaring as much.

"... for now, the message is that the average stock making up the Nasdaq 100 Index is not confirming the bullish message of the NDX’s higher price highs...the divergence does not absolutely have to persist; the market could just power through it, but that is not usually the way things usually work out."

Euthanasia of the rentier appears to be increasingly the modus operandi of the central planning caste of the world. As we noted previously, Bernanke's (and now Yellen's) plan to exterminate savers is wholly unsustainable, The Fed's insistence that "our savers collectively have to hold all the assets of the economy and a strong economy produces much better returns in general" must be juxtaposed with comments from a money manager that "I don't think that's a fair-trade" for money intended to be invested safely." No matter how hard they herd the masses, the elderly (and still working) respond, "At our age, we can't be a risk taker anymore."

We might think that Washington is as pitchfork-worthy today as France was in 1787, or Tsarist Russia in 1917; however, we are still likely a few leagues away from the igniting point that sparks a true revolution, where reality sets in and replaces the mirage created by economic-political brainwashing. .. Just in time to celebrate Independence Day, our illusionist government came out with “great ‘job numbers’” to keep the fireworks flying high, exploding in spectacular multi-colored brightness, lifting our spirits of eternal hope for a “recuperated” economy following course to a Dow Industrials that would surpass the 17,000 mark on the day 288,000 jobs were said to be added by employers. But all of this hoopla is an exercise in farce-economics, stats in Affluence Economics that have little to do with the economic condition of the have-nots, where unemployment rates, jobs created and rate of inflation need to be extracted from other data applicable to them, stats that reflect Have-nots Economics, not Washington’s generic bullshit.

Pro-Russian separatist forces have been forced to retreat from their stronghold in Slavyansk following "massive shelling" in the early morning from Ukraine's 'anti-terrorist' forces. Armored vehicles entered the city and the rebels, according to RT, decided to move back to their headquarters in Kramatorsk to 'prepare' in advance for further offensives. Just days after the cease-fire was lifted, newly-appointed Defense Minister Valery Heletey commented the "order to free Slaviansk from the (separatist) fighters has been carried out," but pro-Russian supporters are not done yet and exclaimed: "Pass on these words to Putin: the people of the Donbass believed him for some reason when he said he would help. But now they (government forces) are killing peaceful civilians and if that is not genocide I would like to know what is."

Under the influence of the neo-Keynesian interventionists and the professors at the Fed, the public has been brainwashed into believing that governments can revive economic growth. However, as Hayek notes, “the more the state ‘plans’ the more difficult planning becomes for the individual." As the Rahn Curve states, the larger the government becomes beyond a certain point (about 20% of GDP) the slower economic growth will be. Always remember, Faber warns, echoing Barry Goldwater, “The government that is big enough to give you all you want is big enough to take it all away."

It's common sense - everyone knows that interest rates are going to rise (how can they fall any lower?) Inflation will come back (because the Fed said so), economic growth will flourish (because the Fed said so), and longer-term bond yields will surge in a bond-bull-destroying renaissance proving stock market speculators right all along. Except that isn't what history shows us... When a central bank dominates the domestic bond market, all bets are off (whether economically rational or not). When a sovereign simply cannot afford higher interest rates, all bets are off (no matter what your economic textbook says).