When it comes to reporting the news, Reuters ability to get the scoop first may only be rivaled by its ability to "spin" analysis in a way that will make a normal thinking person's head spin. Such as the following piece of unrivaled headscrathing titled "The good news behind oil prices" whose conclusion, as some may have already guessed, is that "the surge in crude oil is looking more like a harbinger of better days." Let's go through the arguments.
The situation in Greece should create some big headlines this week. The bond exchange “invitation” is set to expire at 3pm EST on Thursday March 8th. This is the so-called Private Sector Involvement or PSI. Greece has other steps to take during the week, and ultimately the Troika will determine how to proceed with the bailout, but not until the results of the PSI are known. It could be a week of confusing, misleading, and market moving headlines. Figuring out the “proper” reaction to each bit of news will require understanding the terms, and hoping the headlines are accurate – which given how confusing the situation is, cannot be fully counted on. Remember, the original “invitation” from the Greek government was for an amortizing bond, which was then changed to a series of 20 “bullet” bonds, so the level of confusion remains high.
In the US, anyone who has chosen to live within his or her means over the past four years has paid a heavy price. As is the case everywhere else, the Fed gets things precisely backwards. Their contention is that borrowing is essential for economic "health". In reality, the ability to borrow is the RESULT of the economic health displayed by those who have savings to lend. But what the Fed and the other central banks want to "save" is not the economy, it is the financial system and the imaginary prices of financial assets which form its only foundation.
In his latest piece on popular delusions, SocGen's Dylan Grice conducts a much needed advance thought experiment looking at two specific things: on one hand he isolates the next inevitable social tension: that between "everyone" and the central bankers. Because if there is one specific reason why OccupyX never truly got off the ground is that deep down, the population knows that while bankers are to be despised for their "contributions" to society, they would never have the opportunity to do what they do absent the enabling stance of the "democratically" elected politicians, and more importantly, the deeds of those few academics stuck in a dark room, who daily decide the nominal fate of the world courtesy of money printing. Which means that in the inevitable progression of "marginalizing-then-brutalizing", when society finally cuts through all the noise and focuses on the one source of all that is wrong in the world, it will not be those residing at 200 West, but the tenants at the Marriner Eccles building: "Politicians can and will take back what they have previously given if and when it is deemed in their interests to do so. One way they do this is by using the time-tested political strategy known as “marginalise-then-brutalise”. Politicians start by identifying the obstacle to their objectives. For a government short of funds the objective is to raise more funds, and the obstacle is any group/sector which has them." Thus Mugabe “marginalised then brutalised” white farmers, while Hugo Chavez set his sights on private sector “profiteers” … for Hitler it was the Jews, for Philip IV of France it was the Knights Templar, for Diocletian it was the Christians, etc. How long before it is the central banks?" How long indeed? And whether it is with or without political prodding, once the central planning experiment fails, as it will, we would certainly not want to be in Bernanke's shoes...
As Americans, we live in two worlds; the world of mainstream fantasy, and the world of day-to-day reality right outside our front doors. One disappears the moment we shut off our television. The other, does not… When dealing with the economy, it is the foundation blocks that remain when the proverbial house of cards flutters away in the wind, and these basic roots are what we should be most concerned about. While much of what we see in terms of economic news is awash in a sticky gray cloud of disinformation and uneducated opinion, there are still certain constants that we can always rely on to give us a sense of our general financial environment. Two of these constants are supply and demand. Central banks like the private Federal Reserve may have the ability to flood markets with fiat liquidity to skew indexes and stocks, and our government certainly has the ability to interpret employment numbers in such a way as to paint the rosiest picture possible, but ultimately, these entities cannot artificially manipulate the public into a state of demand when they are, for all intents and purposes, dead broke.
American investor (and longtime CM.com member) Erik Townsend has spent the past several years living internationally, with an eye to which countries may be good alternatives if economic crisis and/or Peak Oil start to materially impact life in the US. His main observation as an expat? Through its misguided policies, the US has been exporting inflation to the rest of the world, raising prices all over the globe (as an example, he cites a $57 chicken pot pie from the menu at a 'working class' restaurant in Australia). This inflation is affecting the rest of the world harshly, but is not yet being felt in the US due to our ability to export it as the issuer of the world's reserve currency. Our immunity will not last forever though, and when it ends, a massive upwards spike in prices is going to hit US markets.
Less risk, maybe, but that's a long way from a sustained recovery.
Back in October, when Greece was rewarded with further bond haircuts for progressively missing its economic targets, even after having gotten caught on at least one occasion making its economy appear worse than it was, we said that it is only a matter of time before "Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." In the aftermath of this statement, we got the Irish and the Portuguese proceeding to slowly but surely do just that. Today, it was Spain's turn to make it 3 out of 4 after as Reuters noted so appropriately, "Spain defies Brussels on deficit target" clarifying that "Spain set itself a softer budget target for 2012 on Friday than originally agreed under the euro zone's austerity drive, putting a question mark over the credibility of the European Union's new fiscal pact. Prime Minister Mariano Rajoy insisted he was acting within EU guidelines because the plan was still to hit the European Union public deficit goal of 3 percent of gross domestic product (GDP) in 2013." That Italy is sure to follow is absolutely guaranteed, however just because the ECB is now indirectly monetizing BTPs the true impact will be delayed far more, and instead of taking prompt steps to remedy the situation, the European complacency will be accentuated by the fact that bond yields are very low, and supposedly indicates the true state of the economy. No. All it indicates is the conversion of future inflation (courtesy of €1 trillion in new money in the past 3 months) for a very temporary respite before all hell ultimately breaks loose as countries pretend everything is ok as bond yields are pushed artificially low. And in doing nothing, the fundamentals in the economy only get worse and worse. Germany knows this very well, and the Economist explains the reaction to Spain's surprising statement today perfectly...
Wednesday’s sell off is being attributed to one massive sell trade of 31 tonnes on the Chicago Mercantile Exchange during Bernanke’s speech. There are rumours of a large US fund selling and also that the selling may have been by JP Morgan – rumoured to be acting on behalf of an Asian fund. Who sold off and why is less important than the fundamentals of the gold market. Absolutely nothing has changed regarding the fundamentals of gold which remain as sound as ever with broad based demand from store of wealth buyers, institutions and central banks internationally and especially in Asia. Good volumes have been seen on the Shanghai Gold Exchange in recent days. In India, lowest gold prices in a month saw strong physical bullion demand and physical buyers hunting for gold bargains to meet the wedding season demand. India remains the world’s largest buyer of the yellow metal (900 tonnes/year) but China is expected to outpace them this year according the World Gold Council. ETF holdings gained 238,674 ounces to a record high of 70.76 million ounces, showing that institutions and investors remain keen on gold. Also, options data has not changed since Wednesday’s price falls.
Here's the video of my original interview, recorded on Monday, February 27, 2012, about gold and silver price manipulation on the Keiser Report with Max Keiser.
The last time Laszlo Birinyi came out with a bold market prediction was back in January 2011, when he forecast that the market would go to 2,854 by September 4, 2013 (more or less precisely to the dot). Many thought he was joking; he was not, and a month later he repeated the same forecast, leading to the advent of the Birinyi ruler. Needless to say, a year after his initial forecast the market was down. However, now that we have had yet another of the now traditional market blow off top moves on massive liquidity injected by central banks, the time to trot Birinyi back on the stage is upon us, and sure enough earlier today he made an appearance in Bloomberg where he proposed his latest forecast of 1,700 in the S&P by year end. Granted this is less aggressive than his previous forecast, which however still stands, so below we present visually the move that the market has to undergo in order to hit both of his targets, courtesy of John Lohman. Since we now have two waypoints on the road to exponential market nirvana, it is no longer a smooth single sloped, but rather a bi-sloping ramp, for which we can only assume one has to use a "bi-ruler" whatever that may be.
Next Leg Of The Ponzi Revealed - Foreign Central Banks To Begin Buying US Stocks Outright Starting TodaySubmitted by Tyler Durden on 03/01/2012 14:01 -0500
We were speechless when we read this from Bloomberg...
Back in September, before the transition from then ECB head J.C. Trichet to current Goldman plant and uber printer Mario Draghi we asked whether "Trichet will disgrace his already discredited central banker career by pushing a rate cut before he is swept out of the corner office by Mario Draghi, or will the former Goldmanite Italian become the most hated man in Germany soon, after he proceeds to ease, even as Germany still experiences Chinese inflationary re-exports. The answer will be all too clear in just a few months." Sure enough, following a whopping €1 trillion in incremental liquidity released by the ECB in the three shorts months since Draghi's ascension on November 1, all under the guise that the ECB is not printing when it most certainly is, albeit "hidden" by the idiotic claim that it accepts collateral for said printing (what collateral - Italian and Spanish bonds, which will become worthless the second even more printing is required in a few short months? This is run time collateral that can be issued "just in time" to convert it to even more cash as UniCredit did again today), the answer is becoming clear. Slowly but surely the realization is dawning on Germany that while it was sleeping, perfectly confused by lies spoken in a soothing Italian accent that the ECB will not print, not only did Draghi reflate the ECB's balance sheet by an unprecedented amount in a very short time, in the process not only sending Brent in Euros to all time highs (wink, wink, inflation, as today's European CPI confirmed coming in at 2.7% or higher than estimated) but also putting the BUBA in jeopardy with nearly half a trillion in Eurosystem"receivables" which it will most likely never collect.
There’s a lot of talk right now, for example, about rising oil prices which have created uncomfortably high gasoline prices. In gold terms, however, gasoline prices are in a deflationary spiral. The chart below shows unleaded gasoline prices in grams of gold since January 1976. Priced in grams of gold, gasoline is near an all-time low. Buffett (and others) argue strongly that investors should be in stocks… that a company like Coca Cola or productive farmland is a better long-term investment than a useless hunk of metal.He’s probably right. Except that the useless hunk of metal isn’t really an investment. It’s an anti-currency… appropriate for those who want to sit out of the market and be in cash without having to be in cash.