In the final part of Hugh Hendry's 3-part (part 1 and part 2 here) interview with MoneyWeek's Merryn Somerset the Sanguine Scot, perhaps surprisingly to some given his previous negativity - though fitting with his world view of fiat currency destruction - believes "to bet against China or Chinese equities, or the Chinese currency is to bet against the omnipotence of central banks. One day that will be the right trade, just not ready or sure that that is the right trade today."
November 21 - Gold $1197.50 up $6.80 – Silver $16.40 up 26 cents
Bill Cosby And GATA
As Day 2 of Carl Levin's Senate hearing on the fact that banks did indeed corner and rig the physical commodity markets - with the erosion of the line separating banking from commercial activities leading to the detriment of consumers and the financial system - we thought the world needed a 'dummy's guide' to why the biggest banks should not be allowed to do this... or in legalese, here are the four most negative effects of allowing FHCs to engage in Complementary Commodity Activities.
Just days after the NY Fed ousted an employee for providing confidential information to a Goldman Sachs banker (who formerly worked at the NY Fed - and has since been fired by Goldman), Bill Dudley - the president of the NY Fed - will face a very skeptical Senate Banking Committee this morning investigating so-called "regulatory capture." Of course, their eyes were finally opened after Carmen Segarra, a former employee, leaked 47.5 hours of taped conversation (as we discussed in detail here), exposing the dismal reality of the relationship between the 'regulator' and the 'regulated' as New York regulators were deferential to Goldman bankers for a supposedly "shady" deal. Dudley's defense (not denial) so far: "We understand the risks of doing our job poorly and of becoming too close to the firms we supervise. Of course, we are not perfect. We sometimes make mistakes."
The most shocking, if already completely buried, news of the day was that - in yet another confirmation that Goldman Sachs is in charge of the New York Fed - a NY Fed staffer was colluding and leaking confidential, material information to a 29-year-old Goldman vice president, himself a former Federal Reserve employee. This only happened because on the day Carmen Segarra disclosed her 47 hours of "secret Goldman tapes" on This American Life, Goldman executives asked the former Fed staffer where he had gotten what appeared to be confidential information from. To nobody's surprise the answer was: The New York Fed. So as the latter, also known as the biggest hedge fund of the western world with $2.7 trillion in AUM, is scrambling to once again prove it is shocked, shocked, that it has become merely the latest subsidiary of Goldman Sachs, Inc., it released the following statement explaining what "really" happened.
"The multiple expansion phase of the current bull market ended in 2013. The strong S&P 500 YTD price gain of 10% roughly matches the realized year/year EPS growth of the index. The index has climbed by 17% annually during the past three years as the consensus forward P/E multiple surged by nearly 60% from 10x to 16x. ... We forecast US stocks will deliver a modest total return of 5% in 2015, in line with profit growth. The US economy will expand at a brisk pace. Corporations will boost sales and keep margins elevated allowing managements to both invest for growth and return cash to shareholders via buybacks and dividends. Investors will cheer these positive fundamental developments."
- Banks Had Unfair Advantage From Commodity Units (Bloomberg)
- Report Notes Deals Between Goldman, Deutsche and Others Drove Up Aluminum Prices (WSJ)
- Goldman, Morgan Stanley Commodity Heyday Gone as Units Faulted (BBG) - because when you can no longer manipulate, you move on...
- Lenders Shift to Help Struggling Student Borrowers (WSJ)
- Immigrants face major hurdles in signing up to new Obama plan (Reuters)
- Distressed Debt in China? Ain’t Seen Nothing Yet, Buyers Say (BBG)
- Banking culture breeds dishonesty, scientific study finds (Reuters)
- Amazon Robots Get Ready for Christmas (WSJ)
The average person assumes the powers-that-be actually know what they are doing and would never lead us into disaster, but quoting my breakfast companion, that would be a very poor assumption. Simply, while mass war on the level of the wholesale slaughter commonplace in the last century is unimaginable to most in the modern context, it is never more than the equivalent of a faulty alarm system away from occurring. Those history buffs among you will confirm that up until about a week before World War I began, virtually no one in the public, the press, the political class, or even the military had any idea the shooting was about to start. And 99.9% of the people then living had no idea the war was about to begin until after the first shot was fired.
"QE is a necessary condition for recovery in Europe, but is not sufficient in itself. The question is where does this bridge take us? The eurozone can survive a couple more years of miserable growth, but it can’t go on forever like this before people lose hope. There is political risk almost everywhere."
- Yellen Inherits Greenspan’s Conundrum as Long Rates Sink (BBG)
- West African Mining Projects Take Hit From Ebola Crisis (WSJ)
- Saudi oil policy uncertainty unleashes the conspiracy theorists (Reuters)
- Senate Rejection of Keystone XL Measure Sets Up 2015 Showdown (BBG)
- Ferguson, Missouri, remains on edge ahead of grand jury report (Reuters)
- Putin Said to Stun Advisers by Backing Corruption Crackdown (BBG)
- Italian ‘Invasion’ Has Swiss Fuming as Immigration Vote Looms (BBG)
- Apple and Others Encrypt Phones, Fueling Government Standoff (WSJ)
Once again all eyes are on the carry-trade driving Yen, whose avalance into oblivion is picking up speed, and where the formerly unimaginable USDJPY level of 120 as presented here in September, is now looking like this week's business, with the only question how long until Albert Edwards' next target of 145 is hit leading to nuclear currency warfare between Japan, Korea, China and ultimately, the US and Europe. Unfortunately, for Japan, at this point the terminal currency collapse will do nothing to incrementally boost exports or its economy, and the former Japan finmin was on the tape warning again that the Japanese recession will persist as USDJPY over 115 is now hurting Japan, something which should by now have been clear to most.
Economists, Military Strategists and Others Warned Us … Long Ago
What is it with us? Don’t we want to understand? Japan announced on Monday that its economy is in hopeless trouble and back in recession (as if it was ever out). And what do we see? ‘Experts’ and reporters clamoring for more stimulus. But if Japan has shown us anything over the past years, and you’re free to pick any number between 2 and 20 years, it’s that the QE-based kind of stimulus doesn’t work. Not for the real economy, that is.
"Back in the heyday of the old Soviet Union, a phrase evolved to describe gullible western intellectuals who came to visit Russia and failed to notice the human and other costs of building a communist utopia. The phrase was “useful idiots” and it applied to a good many people who should have known better. I now propose a new, analogous term more appropriate for the age in which we live: useful hypocrites. That’s you and me, folks, and it’s how the masters of the digital universe see us. And they have pretty good reasons for seeing us that way."
A little more than a year ago, I did a post with a typically subtle headline: "Why Google Glass Will Fail Miserably". Well, this just appeared in Reuters, and although its headline isn't as blunt as mine, the article pretty much states that Glass is every bit the flop I predicted it would be. So there.