Regular readers are well aware of an unresolved problem/issue which has permeated these commentaries for (especially) the past three years: the lack of any rational or objective means for pricing assets, most notably precious metals themselves. There are two enormous obstacles facing any analyst, in attempting to resolve this issue.
Although it may be unrealistically optimistic, I believe my paraphrase of a Churchill quote:
As the market anxiously await Janet Yellen's Humphrey-Hawkins testimony this morning, hanging on every word and intonation, ConvergEx's Nick Colas is reminded of Harry Truman’s famous request: “Give me a one-handed economist!” The U.S. central bank clearly feels challenged by the cross currents of the global economy even as it reiterates confidence in domestic growth prospects. In an effort to help clear things up, Colas brings some 21st century data to the Fed’s distinctly old-school toolset and looks at the historical popularity of 10 Google search terms with a decidedly economic twist. Bottom line: the Google data is clear. The Fed needs to wait a while longer before raising interest rates.
"The economy is booming, according to recent data. GDP grew by 2.6% annualized in the last quarter. And yet oil prices have dropped faster than they did in the crisis of 2008. The US dollar is at record strength. And the gold price has spiked in many currencies ... Something’s not right here." So says Eric Sprott in his latest report observing what may lie in store for oil and gold in the near future.
The trouble with the money printing madness in the Eccles Building is that it generates huge deformations, misallocations and speculative excesses in the financial markets. Eventually these bubbles splatter, as they have twice this century. The resulting carnage, needless to say, is not small. Combined financial and real estate asset markdowns totaled about $7 trillion after the dotcom bust and $15 trillion during the 2008-2009 financial crisis. The Wall Street casino is now festooned with giant deadweight losses waiting to happen. But perhaps none is more egregious than Tesla - a crony capitalist con job that has long been insolvent, and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.
Right now there is a world war taking place right in front of us but all we see on cable news are the nightly military skirmishes on the periphery of the conflict. The real war is economic, financial and currency related and the empire is already over-extended in debt, military operations and financial manipulation. Surely the near-term dollar strength is evidence that while defeat is not imminent and that all markets can be manipulated for a season, ultimately real global market forces will prevail. Just remember that all empires eventually become over-extended financially, economically or militarily and the consequences of retribution and blowback are real and deadly to innocent populations.
With the new and revised (until it is re-revised again to some future date), Greek D-Day set for today's third in the past 2 weeks Eurogroup meeting, every favorable headline serves as a springboard for ES-buying algos, while every negative headline is promptly ignored. And since this is Europe's style trial ballooning, there have been many of both with just these two hitting in the last hour:
- GREECE, EURO ZONE NEAR DEAL ON PACKAGE, REUTERS CITES UNIDENTIFIED GREEK OFFICIAL
- GREECE DID NOT GO FAR ENOUGH IN THEIR LATEST PROPOSAL: GREEK GVOERNMENT SPOKESMAN
Guess which one pushed ES into the green?
According to IMF researcher Brad Jones, who wrote "Asset Bubbles: Re-thinking Policy for the Age of Asset Management", the "business risk of asset managers acts as strong motivation for institutional herding and "rational bubble-riding." This is a critical observation, and one which suggests that the mere groupthink of massive asset managers is what leads to not only herding, lack of originality and the "hedge fund hotel" phenomenon, but also to recurring and ever greater asset bubbles. As Jones further writes, "subdued leverage is not a sufficient condition for financial stability—if systemic risk, and activity in the wider economy, is shaped importantly by large shifts in risk premia owing to the "rational herding" motivations of asset managers."
Like spirits, debt and risk make for a great party but a terrible hangover...
While the world's attention is glued to events in Greece, the real action continues to evolve quietly thousands of kilometers east, in China, where the near record surge in new loans remains unable to offset the dramatic slowdown in shadow banking issuance. And while China's bubble-chasing, animal spirits have recently reoriented themselves from real estate to the stock market, it is the real estate that holds the bulk of China's wealth. The problem here is that as China reported overnight, new-home prices in the world's most populous country just recorded their biggest annual decline ever!
In a world in which the NSA's fingerprints are already on every form of electronic communication and information exchange, the latest revelation - conveniently presented by a Russian-based security firm - may have just implicated the US digital supespy agency in the biggest "backdoor" infiltration scandal of all time... and with it crushed the future revenue potential of countless US technology corporations.
As London is to Moscow, so Miami is to Rio... Following the re-election of Dilma Rousseff - the center-left president that is generally loathed by Brazil's elites - the WSJ reports, rich Brazilians are relocating to South Florida en masse. As one attorney notes, "mainly they feel concerned about the instability of Brazil’s political environment; they don’t want to be the last ones to leave,” with Brazilians among Miami’s top three foreign buyers of high-price real estate, along with Argentines and Venezuelans, two other troubled economies. As one Rio broker exclaims, "Miami is the biggest Brazilian city outside of Brazil right now."
In the 40 years since US President Richard Nixon made what was then considered a bold move, visiting Mao Zedong in Communist China, both countries have changed dramatically. The US has become increasingly socialistic, more focused on Big Government and more of a totalitarian state; shifting from the world’s foremost creditor nation to the world’s foremost debtor nation. By contrast, China has opened up considerably, with billions of people becoming upwardly mobile, in response to China becoming more capitalistic. Increasingly, the US is acting like a country in decline, whilst China is acting like a country on the rise.
Contrary to popular opinion, it is not “demand” from the world’s population which creates the mind destroying drug trade. Rather, it is the world financial oligarchy, looking for massive profits and the destruction of the minds of the population it is determined to dominate, which organized the drug trade. The case of HSBC underscores that point. Serving as the central bank of this global apparatus, is HSBC.