en Why Is China Hoarding Gold? Alan Greenspan Explains <p>Remember when instead of pontificating on and explaining the consequences of three decades of devastating, ruinous, irresponsible Fed policies, and eagerly sharing ideas on how to "fix" these unfixable problems, <em>Alan Greenspan was the primary culprit behind everything that is now wrong and broken with the world's financial system?</em> Oh, and also was <em><strong>not </strong></em>an "Austrian" economist? </p> <p>Good times. </p> <p>Today we bring you the "other" Greenspan: the one who is blissfully unaware that, almost singlehandedly, he destroyed western capitalism, which is now living day to day, on borrowed time from one central bank printer to another. Ironically, the topic of his most recent Op-Ed for the Council of Foreign Relation's Foreign Affairs magazine, is none other than the default Kryptonite to every central banker, himself included if only a decade or so ago: <strong>gold. </strong></p> <p>And specifically the reason why, as we have covered consistently over the past 3 years, while the rest of the world is selling (if only paper gold), China just can't get enough of (physical) gold. </p> <p>So for everyone curious what the world's most infamous central banker, probably of all time, thinks about China's gold hoarding ambitions, read on.</p> <p>* * *</p> <p><strong>Why Beijing Is Buying </strong></p> <p><em>By Alan Greenspan, first posted in <a href="">Foreign Affairs</a></em></p> <p><strong>If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system</strong>. It would be a gamble, of course, for China to use part of its reserves to buy enough gold bullion to displace the United States from its position as the world’s largest holder of monetary gold. (As of spring 2014, U.S. holdings amounted to $328 billion.) But the penalty for being wrong, in terms of lost interest and the cost of storage, would be modest. <strong>For the rest of the world, gold prices would certainly rise, but only during the period of accumulation. </strong>They would likely fall back once China reached its goal. </p> <p>The broader issue -- a return to the gold standard in any form -- is nowhere on anybody’s horizon. It has few supporters in today’s virtually universal embrace of fiat currencies and floating exchange rates. Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close. Today, the acceptance of fiat money -- currency not backed by an asset of intrinsic value -- rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.</p> <p>If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold.<span style="text-decoration: underline;"><strong> The fact that they do indicates that such currencies are not a universal substitute</strong></span>. Of the 30 advanced countries that report to the International Monetary Fund, only four hold no gold as part of their reserve balances. Indeed, at market prices, the gold held by the central banks of developed economies was worth $762 billion as of December 31, 2013, comprising 10.3 percent of their overall reserve balances. (The IMF held an additional $117 billion.) If, in the words of the British economist John Maynard Keynes, gold were a “barbarous relic,” central banks around the world would not have so much of an asset whose rate of return, including storage costs, is negative.</p> <p>There have been several cases where policymakers have contemplated selling off gold bullion. <strong>In 1976, for example, I participated, as chair of the Council of Economic Advisers, in a conversation in which then U.S. Treasury Secretary William Simon and then Federal Reserve Board Chair Arthur Burns met with President Gerald Ford to discuss Simon’s recommendation that the United States sell its 275 million ounces of gold and invest the proceeds in interest-earning assets</strong>. Whereas Simon, following the economist Milton Friedman’s view at that time, argued that gold no longer served any useful monetary purpose, <span style="text-decoration: underline;"><strong>Burns argued that gold was the ultimate crisis backstop to the dollar</strong></span>. The two advocates were unable to find common ground. In the end<strong>, Ford chose to do nothing</strong>. And to this day, the U.S. gold hoard has changed little, amounting to 261 million ounces.</p> <p>I confronted the issue again as Fed chair in the 1990s, following a decline in the price of gold to under $300 an ounce. One of the periodic meetings of the G-10 governors was dedicated to the issue of the European members’ desire to pare their gold holdings. But they were aware that in competing with each other to sell, they could drive the price of gold down still further. They all agreed to an allocation arrangement of who would sell how much and when. Washington abstained. <strong>The arrangement was renewed in 2014. In a statement accompanying the announcement, the European Central Bank simply stated, “Gold remains an important element of global monetary reserves.”</strong></p> <p><strong>Beijing, meanwhile, clearly has no ideological aversion to keeping gold</strong>. From 1980 to the end of 2002, Chinese authorities held on to nearly 13 million ounces. They boosted their holdings to 19 million ounces in December 2002, and to 34 million ounces in April 2009. At the end of 2013, China was the world’s fifth-largest sovereign holder of gold, behind only the United States (261 million ounces), Germany (109 million ounces), Italy (79 million ounces), and France (78 million ounces). The IMF had 90 million ounces.</p> <p>However much gold China accumulates, though, a larger issue remains unresolved: whether free, unregulated capital markets can coexist with an authoritarian state. China has progressed a long way from the early initiatives of Chinese leader Deng Xiaoping. It is approaching the unthinkable goal of matching the United States in total GDP, even if only in terms of purchasing-power parity. But going forward, the large gains of recent years are going to become ever more difficult to sustain.</p> <p>It thus seems unlikely that, in the years immediately ahead, China is going to be successful in vaulting over the United States technologically, more for political than economic reasons. A culture that is politically highly conformist leaves little room for unorthodox thinking. By definition, innovation requires stepping outside the bounds of conventional wisdom, which is always difficult in a society that inhibits freedom of speech and action.</p> <p>To date, Beijing has been able to maintain a viable and largely politically stable society mainly because the political restraints of a one-party state have been offset by the degree to which the state is seen to provide economic growth and material wellbeing. But in the years ahead, that is less likely to be the case, as China’s growth rates slow and its competitive advantage narrows.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="424" height="302" alt="" src="" /> </div> </div> </div> Alan Greenspan Arthur Burns Capital Markets Central Banks China default European Central Bank Federal Reserve Ford France Gerald Ford Germany International Monetary Fund Italy John Maynard Keynes Maynard Keynes None The Economist Tue, 30 Sep 2014 17:41:07 +0000 Tyler Durden 495015 at Another Conspiracy Theory Becomes Fact: The Fed's "Stealth Bailout" Of Foreign Banks Goes Mainstream <p>Back in June 2011, Zero Hedge first posted:</p> <ul> <li>"<a href="Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went">Exclusive: <strong>The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went</strong></a><strong>"</strong></li> </ul> <p>which we followed up on various occasions, most notably with</p> <ul> <li>"<strong><a href="">How The Fed's Latest QE Is Just Another European Bailout</a></strong>" and </li> <li>"<strong><a href="">The Fed's Bailout Of Europe Continues With Record $237 Billion Injected Into Foreign Banks In Past Month</a></strong>."</li> </ul> <p>With the following key chart:</p> <p><a href=""><img src="" width="600" height="375" /></a></p> <p>Of course, the conformist counter-contrarian punditry, for example the <a href="">FT's Alphaville</a>, promptly said this was a non-issue and was purely due to some completely irrelevant microarbing of a few basis points in FDIC penalty surcharges, which as we <a href="">explained extensively over the past 3 years</a>, has nothing at all to do with the actual motive of hoarding Fed reserves by offshore (or onshore) banks, and which has everything to do with accumulating billions in "dry powder" reserves to use for risk-purchasing purposes (alas understanding that would require grasping that reserves are perfectly valid collateral to use as margin against purchase of such market moving products as e-mini futures, which in turn explains why traders usually don't end up as journos).</p> <p>Fast, or rather slow, forward to today when none other than the WSJ's Jon Hilsenrath debunks yet another "<em>conspiracy theory</em>" and reveals it as "<em>unconspiracy fact</em>" with "<a href=""><strong>F<em>ed Rate Policies Aid Foreign Banks:</em></strong></a><em><a href=""> Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank</a>"</em></p> <p>Wait... the Wall Street Journal said that? Yup.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Banks based outside the U.S. have been unlikely beneficiaries of the Federal Reserve's interest-rate policies, and they are likely to keep profiting as the Fed changes the way it controls borrowing costs.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="553" height="436" /></a></p> <p>&nbsp;</p> <p>Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid banks since the beginning of last year for the money, called reserves, they deposit at the U.S. central bankaccording to an analysis of Fed data by The Wall Street Journal. Those lenders control only about 17% of all bank assets in the U.S.</p> <p>&nbsp;</p> <p><strong>Moreover, the Fed's plans for raising interest rates make it likely banks will see those payments grow in coming years.</strong></p> </blockquote> <p>Hmm, we almost feel like we should bring up the dreaded "P" word considering the bolded sentence is a recap of what we said in February of 2013 in <strong><a href="">"How The Fed Is Handing Over Billions In "Profits" To Foreign Banks Each Year</a></strong>." That's ok, though: imitation, flattery and all that...</p> <p>So here is Hilsy "figuring out" what we have been explaining <strong>for over 3 years</strong>!</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Though small in relation to their overall revenues, interest payments from the Fed have been a source of virtually risk-free returns for foreign banks. Large holders of Fed reserves include Deutsche Bank, UBS AG, Bank of China and Bank of Tokyo-Mitsubishi UFJ, according to bank regulatory filings. U.S. banks including J.P. Morgan Chase, Wells Fargo and Bank of America Corp. are also big recipients of Fed interest payments, according to the filings.</p> <p>&nbsp;</p> <p><strong>"It is a small transfer from U.S. taxpayers to foreign taxpayers," said Joseph Gagnon, a former Fed economist at the Peterson Institute for International Economics. The transfer, he added, was a side effect of Fed policy, not a goal.</strong></p> </blockquote> <p>Actually it is a goal, but that would lead to a whole lot of embarrassing congressional hearings which the Fed would rather avoid, plus nobody really "gets" it. The reason why? Apparently things are so "complex" that anyone who figured it out years ago was clearly a conspiracy theorist:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Behind the payments is a complex interplay </strong>between new government regulatory policies and new methods the Fed has developed to control short-term interest rates.</p> <p>&nbsp;</p> <p>The Fed has pumped nearly $3 trillion into the banking system since the 2008 financial crisis, increasing banks' reserves, in efforts to stabilize markets and boost economic growth.</p> <p>&nbsp;</p> <p>Since 2008, it has paid banks interest of 0.25% on those reserves. The Fed affirmed this month that the rate it pays on reserves will be the primary tool it uses to raise short-term borrowing costs from near zero when the time comes, likely next year.</p> <p>&nbsp;</p> <p>In part because regulatory requirements discourage domestic banks from holding more cash reserves than they need, many of the reserves created by the Fed are held by foreign banks.</p> </blockquote> <p>In other words, the Fed-funded risk-free carry trade finally goes mainstream. Of course, all those who read ZH in 2011 will know all of this by now:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The interest payments totaled $4.7 billion so far this year and $5.1 billion last year, and will increase over time as the Fed raises rates. The Fed remits most of its profits to the U.S. Treasury, and the rising cost of the interest payments could put downward pressure on the amount the central bank sends to taxpayers each year, the Fed has said.</p> <p>&nbsp;</p> <p><strong>Some observers say this could become a political challenge for the Fed, especially the payments it makes to foreign banks.</strong></p> <p>&nbsp;</p> <p><strong>"The fact is that the Fed is going to be paying very large amounts of interest to banks," said William Poole, a senior fellow at the Cato Institute and former president of the Federal Reserve Bank of St. Louis. "It's highly likely that some politicians will notice that and given the proclivity of some politicians anyway to demagogue issues, the Fed is going to have some political explaining to do."</strong></p> <p>&nbsp;</p> <p>Some Fed officials also have expressed concern about how these payments will look. "I think the optics are very difficult to defend and might get us into trouble," James Bullard, president of the Federal Reserve Bank of St. Louis, said in an August interview with MarketWatch.</p> <p>&nbsp;</p> <p><strong>Since 2009, foreign banks have earned roughly $5 billion by borrowing dollars cheaply, often at less than 0.10%, in short-term funding markets and depositing those funds at the Fed for 0.25%, according to the Journal analysis. That estimate doesn't take into account the costs of raising money through other means, overhead and taxes, which affect net income.</strong></p> </blockquote> <p>But don't blame the banks - they are merely doing what the Fed is encouraging them to do. And after all who wouldn't collect billions in risk free cash?</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>A spokeswoman for one bank engaged in the trade, Bank of Tokyo Mitsubishi, said that the growth of excess reserves parked at the central banks is a natural consequence of the Fed's policy. "The share of excess reserve balances held by BTMU has been in alignment with its business footprint in the U.S.," she said.</p> <p>&nbsp;</p> <p>Deutsche Bank, which had one of the largest reserve balances at the Fed as of June 30, declined to comment. UBS didn't respond to requests for comment. A Chinese official close to Bank of China said it has been parking funds at the Fed in order to help it comply with liquidity requirements in its home market.</p> <p>&nbsp;</p> <p>The foreign banks' activity is "entirely legitimate because they are providing a financial service and they are taking a spread," said Lou Crandall, chief economist at research firm Wrightson ICAP.</p> </blockquote> <p>Sadly, the WSJ ends just before it gets good. So without further ado, here is what happens if and when one extrapolates a rising rate environment in terms of Fed handouts to foreign banks, <a href=""><em><strong>from what we said in February of 2013</strong></em>:</a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>We show the surge in the foreign bank cash level, as well as the cumulative cash interest paid to these banks assuming a weekly cash interest payment. What the chart shows is that from December 2008 through the last week of January, the Fed has paid out some $6 billion in cash (red line) to European banks simply as interest on excess reserves.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="358" /></a></p> <p>&nbsp;</p> <p>But that's just the beginning. If we are correct in assuming that QE3 will be a replica of QE2 when all the new reserves created ended up as cash on foreign bank balance sheets, it means that we can quite accurately forecast what the total foreign bank cash position will be on December 31, 2013 (as the Fed will certainly not end its open ended monetization of the US deficit before then, or likely, ever). The result: just under $2 trillion in cash held be foreign banks operating in the US, which also means that in calendar 2013, the Fed will fund and subsidize foreign banks a blended interest payment of $3.5 billion! This is entirely separate from the $2 trillion liquidity subsidy that Bernanke will also have handed out to keep these banks afloat, and is $3.5 billion that will flow right through the P&amp;L and end up in the pockets of offshore shareholders who otherwise would very likely be wiped out had it not been for the Fed's relentless efforts to bailout foreign banks.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="357" /></a></p> <p>&nbsp;</p> <p>And since it is improbable that excess reserves held by any banks will decline at all in the coming years, one can also assume that the annualized interest paid to foreign banks, which would amount to at least $5 billion pear year, every year, will continue indefinitely as a direct Fed subsidy to the bottom line of Foreign banks.</p> <p>&nbsp;</p> <p>All of this, of course, ignores what happens should the Fed hike interest rates across the board, which will also mean rising the rates on IOER, once inflation finally strikes: simple math means a 1% IOER means some $20 billion in interest paid to foreign banks, 2% - $40 billion, <em><strong>5% - $100 billion paid to foreign banks</strong></em>, and so on. Putting these numbers in perspective, let's recall that Italy's third largest bank <a href="">just got a €3.9 billion bailout </a>(its third), and has a market cap of some €2.9 billion.</p> <p>&nbsp;</p> <p>We can only hope someone in Congress asks Ben Bernanke in two weeks <em><strong>just under which Fed charter </strong></em>it is that the Fed is more focused on generating profits (not just trillions in excess liquidity) for European banks, than on opening up consumer lending which has been stuck in "petrified" mode for the past 4 years, with the total amount of loans outstanding currently at all US banks - foreign and domestic - at levels last seen the week Lehman filed for bankruptcy.</p> </blockquote> <p>Obviously, nobody asked Bernanke and nobody has asked Yellen this simple question, because until last night apparently nobody aside from the Zero Hedge community had any grasp of what is going on. </p> <p>That said, we doubt that anyone in control will ask <strong>any related questions </strong>in the near of not so near future even with Hilsenrath's "How The Fed Is Bailing Out Foreign Banks For Dummies" primer, because let's not forget - the same banks that control the Fed are also the same banks that purchase politicians at every possible opportunity (see for example: <a href="">With Cantor Down, Which Other Politicians Has Goldman Invested In</a>?). </p> <p>In fact, the only good news from Hilsenrath's report is that yet another conspiracy theory has been documented as unconspiracy fact. Then again, Zero Hedge readers knew all of this over three years ago, for free.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="553" height="436" alt="" src="" /> </div> </div> </div> Bank of America Bank of America Ben Bernanke Ben Bernanke Borrowing Costs Carry Trade Cato Institute Central Banks China Consumer lending Deutsche Bank Excess Reserves Federal Reserve Federal Reserve Bank Institute For International Economics Joseph Gagnon Lehman Monetization None Wall Street Journal Wells Fargo Tue, 30 Sep 2014 17:25:56 +0000 Tyler Durden 495000 at Retail Investors Pile Into Stocks Amid "Malign, Unthinking Mental Slavery" <p><em>Submitted by <a href="">Tim Price via Sovereign Man blog</a>,</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>“Politicians and diapers have one thing in common. They should both be changed regularly, and for the same reason.” – Anonymous.</p> </blockquote> <p>The French statesman George Clemenceau once commented that war is too important to be left to generals.</p> <p><strong>At this stage in the game one might be tempted to add that monetary policy is far too important to be left to politicians and central bankers.</strong></p> <p>We get by with free markets in all other walks of economic and financial life – <strong><span style="text-decoration: underline;">why let the price of money itself be dictated by a handful of bureaucrats?</span></strong></p> <p>It should be striking that government bonds, in nominal terms, have never been this expensive in history, even as there have never been so many of them. The laws of supply and demand would seem to have been repealed.</p> <p><strong>As evidence for the prosecution we cite the US Treasury bond market, the world’s largest.</strong></p> <p>The US national debt currently stands at $17.7 trillion. With a ‘T’.</p> <p>Benchmark 10 year Treasuries currently offer a yield to maturity of 2.5%. US consumer price inflation currently stands at 1.7%. (We offer no opinion as to whether US CPI is a fair reflection of US inflation.)</p> <p>On the basis that US “inflation” doesn’t change meaningfully over the next 10 years, US bond investors are going to earn an annualized return just a smidgen above zero percent.</p> <p>Now it may well be that US Treasury yields have further to fall. As SocGen’s Albert Edwards puts it,</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>“Our ‘Ice Age’ thesis has long called for sub-1% bond yields and I see this extending to the US and UK in due course.”</strong></p> </blockquote> <p>We nurse no particular view in relation to how the government bond bubble (for it surely is) plays out.</p> <p>It could be that yields grind relentlessly lower for some time yet. Or perhaps they burst spectacularly on the back of the overdue return of economic common sense.</p> <p><span style="text-decoration: underline;"><strong>But as Warren Buffett himself once said, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.”</strong></span></p> <p><span style="text-decoration: underline;"><strong>The central bank bond market poker game has been in train for a good deal longer than half an hour, and the stakes have never been higher.</strong></span></p> <p><span style="text-decoration: underline;"><strong>Sometimes, if you simply can’t fathom the new rules of the game, it’s surely better not to play.</strong></span></p> <p>That’s why we’re not in the business of chasing US Treasury yields, or Gilt yields, or Bund yields, ever lower – we’ll keep our bond exposure limited to only the highest quality credits yielding the highest possible return.</p> <p>Even then, if Fed tapering does finally dissipate in favor of Fed hiking (stranger things have happened, though we can’t think of any off the top of our head), it will make sense to eliminate conventional debt instruments from client portfolios.</p> <p><span style="text-decoration: underline;"><strong>But such madness is not limited to the world of bonds. Malign, unthinking mental slavery has fixed itself upon the equity markets, too.</strong></span></p> <p>It’s extraordinary that as stock markets have powered ahead, index trackers have enjoyed their highest ever inflows.</p> <p>The latest IMA data show that more UK retail money was put into tracker funds in July than in any other month since records began.</p> <p><strong>In other words, retail investors are pouring into the market at its all-time high.</strong></p> <p>We accept the ‘low cost’ aspect of tracker funds and ETFs; we take serious issue with the idea of buying stock markets close to or at their all-time.</p> <p>But there is a middle way between the Scylla of bonds at all-time low yields and the Charybdis of stocks at all-time high prices. <span style="text-decoration: underline;"><strong>Value</strong></span>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="477" height="379" alt="" src="" /> </div> </div> </div> Albert Edwards Bond CPI Equity Markets fixed Monetary Policy National Debt Warren Buffett Tue, 30 Sep 2014 17:06:23 +0000 Tyler Durden 495014 at Why Europe's Doomsayers Are Right, In One Chart <p>To say that Europe is doomed is an understatament, so much so that <em><strong>every </strong></em>European politician, banker, bureaucrat, and bean-counter has, over the past 5 years, taken at least one opportunity to deny and thus validate the statement. </p> <p>But while there is cornucopia of reasons which foretell the collapse of the artificial monetary and pseudo-political union, whether it is the relentless deterioration in European output:</p> <p><a href=""><img src="" width="600" height="410" /></a></p> <p>or the collapse in private lending, something the ECB is supposedly trying to fix with its latest TLTRO/Private QE...</p> <p><a href=""><img src="" width="600" height="412" /></a></p> <p>&nbsp;</p> <p>or the mountain of private debt created <em><strong>since </strong></em>the Great financial crisis.</p> <p><a href=""><img src="" width="600" height="415" /></a></p> <p>&nbsp;</p> <p>Eclipsed only by the amount of public debt created in the same period...</p> <p><a href=""><img src="" width="600" height="438" /></a></p> <p>&nbsp;</p> <p>... one thing is clear: Europe is finished, though not for any of the above reasons but for a far more simple one, a reason very well-known to the Japanese - <em><strong>there simply won't be any Europeans left.</strong></em></p> <p><a href=""><img src="" width="600" height="417" /></a></p> <p>In retrospect perhaps it is time for Wolfi Schauble to take a stab at draft 2 of his famous FT scribe: "<a href="">Ignore the doomsayers: Europe is being fixed</a>," because, we are sad to report, the doomsayers are right: Europe is finished.</p> <p><em>Source: <a href="">Geneva Reports on the World Economy</a></em><a href=""></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1036" height="720" alt="" src="" /> </div> </div> </div> fixed Tue, 30 Sep 2014 16:33:39 +0000 Tyler Durden 495013 at Is the Stock Market Top In? <p><em>Submitted by <a href="">Charles Hugh-Smith of OfTwoMinds blog</a>,</em></p> <p><em>The pool of&nbsp;<em>greater fools</em>&nbsp;willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.</em></p> <div><span><strong>Is the top in U.S. stocks in?</strong>&nbsp;The consensus is "no"--corporate profits are rising, the U.S. economy is recovering and has reached "escape velocity," i.e. it can continue expanding even as the Federal Reserve ends its monetary stimulus (QE) and plans the first increase in interest rates since the zero-interest rate policy (ZIRP) was launched in response to the Global Financial Meltdown.</span></div> <div>&nbsp;</div> <div><span>Many observers have noted that global capital flows (from the risky periphery to the less-risky core) favor U.S. stocks and bonds--another reason to see the 5.5-year rally continue to new highs.</span></div> <div> <div><span><strong>The case for the top being in rests on three pillars:</strong>&nbsp;extremes in monetary manipulation (oops, I mean policy), sentiment, leverage and liquidity, the rise of the U.S. dollar and the&nbsp;<em>diminishing returns</em>&nbsp;on monetary stimulus and the repression of interest rates.</span></div> <div>&nbsp;</div> <div><span><strong>A number of chart-oriented sites have made the technical case that extremes in sentiment, valuation and leverage will unwind as gravity reasserts itself.</strong>&nbsp;Various cyclical analyses also suggest that the current Bull rally is getting long in tooth and due for a reversal.</span></div> <div>&nbsp;</div> <div><span>For an abundance of charts that call into question the consensus narrative of "onward and upward forever," please click through the excellent websites of&nbsp;<a href="" target="resource">John Hampson</a>&nbsp;and&nbsp;<a href="" target="resource">Lance Roberts</a>.</span></div> <div>&nbsp;</div> <div><span>While conventional pundits are falling over themselves in their haste to issue soothing claims that a stronger dollar is good for corporate profits and the stock market, these feel-good analyses ignore the one key dynamic of a stronger dollar:&nbsp;<strong>profits earned in other currencies will convert to fewer dollars as the dollar strengthens.</strong>&nbsp;I have covered this dynamic for many years.</span></div> <div>&nbsp;</div> <div><span>This means corporate profits earned overseas will decline as soon as the effects of the stronger dollar filter through to profit statements--that is, by next quarter. Given that up to 50% of global corporate profits are earned overseas, this is not a trivial dynamic.</span></div> <div>&nbsp;</div> <div><span><strong>The fact that the global economy is stumbling into recession is also ignored by those who see corporate profits rising forever.</strong>&nbsp;With roughly half of profits of global companies coming from overseas markets, how can a global recession not impact U.S. corporate profits?</span></div> <div>&nbsp;</div> <div><span>If the stock market is indeed a discounting mechanism that prices in developments six months' out, then the hit to profits from the stronger dollar and flagging overseas sales should impact stock prices today, not in three months.</span></div> <div>&nbsp;</div> <div><strong><span>The most interesting case for the top being in is&nbsp;<em>diminishing returns</em>:</span></strong></div> <div><strong><span><strong>Total credit and GDP:</strong>&nbsp;rapidly increasing credit has a diminishing return as measured by GDP growth.</span></strong></div> <div><strong><span><img src="" align="middle" border="0" /></span></strong></div> <div>&nbsp;</div> <div><strong><span>The Fed's balance sheet and the S&amp;P 500:</span></strong></div> <div>&nbsp;</div> <div><strong><span><img src="" align="middle" border="0" /></span></strong></div> <div>&nbsp;</div> <div><strong><span>Money velocity: diminishing returns:</span></strong></div> <div>&nbsp;</div> <div><strong><span><img src="" align="middle" border="0" /></span></strong></div> <div>&nbsp;</div> <div><strong><span>Small biz: fading at the margins:</span></strong></div> <div>&nbsp;</div> <div><strong><span><img src="" align="middle" border="0" /></span></strong></div> <div>&nbsp;</div> <div><strong><span><strong>Federal student loans:</strong>&nbsp;soaring costs, diminishing returns on the degrees being bought:</span></strong></div> <div>&nbsp;</div> <div><strong><span><img src="" align="middle" border="0" /></span></strong></div> <div>&nbsp;</div> <div><strong><span>The return on a college degree? Diminishing faster than you can say "default":</span></strong></div> <div>&nbsp;</div> <div><span><img src="" align="middle" border="0" /></span></div> <div>&nbsp;</div> <div><strong><span>Labor participation and real median income: diminishing returns on all the outlandish money pumping and Federal deficit spending:</span></strong></div> <div>&nbsp;</div> <div><span><img src="" align="middle" border="0" /></span></div> <div>&nbsp;</div> <div><span><strong>The "easy fixes"--unleashing a tsunami of cheap credit, dropping interest rates to near-zero--only work when creditworthy borrowers have productive uses for the new credit.</strong>&nbsp;If the cheap credit is used by marginal borrowers for speculation, the returns on those fixes are highly vulnerable to collapse once asset bubbles and risk-on carry trades pop.</span></div> <div>&nbsp;</div> <div><span><strong>Extending credit to marginal borrowers does not magically transform the borrowers' creditworthiness.</strong>&nbsp;All monetary easing and other stimulus does is&nbsp;<em>expand the risk of a credit collapse by expanding the debt extended to risky borrowers.</em>&nbsp;Marginal borrowers will still default as soon as making debt payments becomes painful/impossible; if you want evidence for this, consider how many subprime borrowers defaulted after getting lower rates on their mortgages.</span></div> <div>&nbsp;</div> <div><span><strong>Lowering interest rates does not magically make marginal borrowers creditworthy, or magically make speculative bets productive.</strong>&nbsp;In these two important ways, the "fixes" cannot fix what's broken. What they have done is&nbsp;<em>enable more of what has failed spectacularly</em>: extend credit and leverage to speculators who have ramped risk-on assets to the moon&nbsp;<em>because cheap credit and low interest rates have enabled lucrative leveraged betting.</em></span></div> <div>&nbsp;</div> <div><span>The fantasy was that all this cheap credit would magically flow into productive expansion of the real economy; instead, it fueled carry trades and an expansion of incredibly risky credit to subprime borrowers buying vehicles, homes with 3% down payment, etc.</span></div> <div>&nbsp;</div> <div><span><strong>The "recovery" constructed on this expansion of risk has built-in limits:</strong>&nbsp;once speculative trades reverse or blow up, the process reverses, and assets must be liquidated to escape the tightening noose of leverage. Once all the marginal borrowers have purchased vehicles, taken on student loans and bought houses and stocks on speculation, the pool of&nbsp;<em>greater fools</em>&nbsp;dries up and the deleveraging of assets purchased on margin/credit unleashes a feedback loop: selling begets more selling.</span></div> <div>&nbsp;</div> <div><span><strong>Those who believe the stock market can continue rising despite the end of the Fed's "free money for financiers" programs are implicitly claiming that the pool of <em>greater fools</em>&nbsp;is still filled to the brim.</strong>&nbsp;Simply put, speculating with leveraged free money and extending credit to marginal borrowers is not sustainable or productive, and the stock market seems poised to reflect three dynamics:</span></div> <div>&nbsp;</div> <div><span>1. reversion to the mean and the unwinding of extremes</span></div> <div>&nbsp;</div> <div><span>2. the decline in corporate profits resulting from a stronger U.S. dollar</span></div> <div>&nbsp;</div> <p><span>3. the pool of&nbsp;<em>greater fools</em>&nbsp;willing and able to buy assets at higher prices with leveraged free money has been drained by six years of credit/risk expansion.</span></p></div> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="538" height="392" alt="" src="" /> </div> </div> </div> default Deficit Spending ETC Federal Deficit Federal Reserve Free Money Global Economy Meltdown Money Velocity Recession recovery Student Loans Tue, 30 Sep 2014 16:08:44 +0000 Tyler Durden 495012 at Hong Kong Protesters Give Wednesday Deadline For Reform As Chinese Army Watches From Above <p>The crowds of protesters in Hong Kong swelled overnight with some <strong>estimates that 3-400,000 "will join in a show of people's power," on the eve of the two-day National Day holiday</strong>. With neither side showing any signs of backing down, protestors remain calm and police keeping their distance - though monitoring from on high - as the Occupy Central group said it will <strong>announce plans for its next stage of civil disobedience on Wednesday</strong> if Hong Kong Chief Executive Leung Chun-ying does not meet their demands for democratic reform, including true universal elections by October 1 and Leung's resignation. Leung has called for Occupy Central leaders to "fulfill the promise they made to society" and immediately <strong>stop the protests, which he said have gotten "out of control,"</strong> adding that, for now, they could keep control without the help of the People's Liberation Army (PLA). The protest meme remains one heard around the world - in addition to their <strong>concerns about democracy and out of control local government, Hong Kong’s younger generation are worried about low-paying jobs</strong>.</p> <p>&nbsp;</p> <p><a href=""><em>As Bloomberg reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Pro-democracy protests swelled in Hong Kong on the eve of a two-day holiday that may bring record numbers to rallies spreading throughout the city as organizers pressed demands for free elections.</p> <p>&nbsp;</p> <p>With the workday ended and temperatures dropping, thousands of people were returning to the three main demonstration points, blocking some of the city’s roadways. Hong Kong marks China’s National Day tomorrow, the 65th anniversary of the founding of the People’s Republic of China and Chung Yeung Festival on Thursday, when Hong Kong people honor their ancestors.</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 432px;" /></a></p> <p>&nbsp;</p> <p><strong>“It’s quite possible that at least more than 100,000, if not up to 300,000, 400,000 people, will join in the protest in a show of people’s power,” </strong>Willy Lam, adjunct professor at Chinese University of Hong Kong, said in an interview today. “They want to convince the Hong Kong government and Beijing that<strong> any use of force will be counter-productive. It will only galvanize more of the rest of Hong Kong’s 7 million people.”</strong></p> </blockquote> <p><a href=""><em>And as VOA adds,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Neither side is showing any signs of backing down even as China prepares to mark its National Day on Wednesday.</strong></p> <p>&nbsp;</p> <p>In a short statement, <strong><span style="text-decoration: underline;">the Occupy Central group said it will announce plans for its next stage of civil disobedience on Wednesday if Hong Kong Chief Executive Leung Chun-ying does not meet their demands</span></strong> for democratic reform, including true universal elections by October 1 and Leung's resignation.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>Leung said he would not give into the protesters' demand for his resignation or for greater democratic reforms.</p> <p>&nbsp;</p> <p>In a speech Tuesday, <strong>Leung called for Occupy Central leaders to "fulfill the promise they made to society" and immediately stop the protests, which he said have gotten "out of control."</strong></p> <p>&nbsp;</p> <p>Leung said the central government decision on Hong Kong on August 31 shows that it will not comply to illegal threats made by certain people.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>He also said on Tuesday Hong Kong police would<strong> be able to maintain security without help from People's Liberation Army (PLA) troops from the mainland.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>Hong Kong police have withdrawn now for more than a day and protesters are continuing their efforts to prepare for a longer, more drawn out confrontation.</strong></p> </blockquote> <p><span style="text-decoration: underline;"><em>But, as SCMP reports,</em><strong> Beijing may be keeping quiet about the Occupy Central protests, but the army appears to be keeping a keen eye on what's going on.</strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>This picture taken by an SCMP photographer today shows a man in the People's Liberation Army using binoculars to survey the protest site in Admiralty.</p> <p>&nbsp;</p> <p><a href=""><img src="" style="width: 600px; height: 372px;" /></a></p> <p>&nbsp;</p> <p>A row of tripods can be seen in the windows, suggesting the occupiers have been under the watchful eye of China for some time.</p> <p>&nbsp;</p> <p><strong>Some protesters have voiced concern that authorities may return again in force later Tuesday in a bid to clear the streets before the Chinese holiday, when even more protesters are expected to join the rally.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>The red star on Chinese military headquarters in Admiralty is flashing bright tonight.</strong></span> The star was included in renovations to the building months ago, and it was unveiled in January.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="537" /></a></p> <p>&nbsp;</p> <p>While it was unclear when it had been switched on since then, <strong>the last time the People's Liberation Army's HQ decided to stage a light show on the harbour (in June), it generated controversy and set tongues wagging on whether Beijing was emphasising its sovereignty over Hong Kong.<br /></strong></p> </blockquote> <p><span style="text-decoration: underline;"><strong>It's a protest meme we have seen and heard around the world...</strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Of those who support Occupy Central, <strong>47 percent were under the age of 24.</strong></p> <p>&nbsp;</p> <p>In addition to their concerns about democracy, <strong>Hong Kong’s younger generation are worried about low-paying jobs</strong> and increasing competition from mainland Chinese coming to the financial hub to work.</p> <p>&nbsp;</p> <p>Hong Kong University of Science and Technology professor David Zweig said the controversy surrounding the 2017 elections and concerns that <strong>Leung is taking the port city down the wrong path</strong> are not the only issues driving the protests.</p> <p>&nbsp;</p> <p><strong>“I think the other issue is that there is a lot of anger.</strong> If you look at the data in general in Hong Kong, January this year, the anger at the central government, the anger at the local government, <strong>the concerns about future job prospects</strong> and all that and anxiety in general, this is worst than anytime since the major marches of 2003," Zweig said.</p> </blockquote> <p><span style="text-decoration: underline;"><strong>"I think if we want something, sacrifices cannot be avoided. No pain, no gain, right? When I see the young people's passion, I support them from deep within my heart. I hope there won't be any bloodshed,"</strong></span> said Fung.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1175" height="1051" alt="" src="" /> </div> </div> </div> China Hong Kong Tue, 30 Sep 2014 15:38:36 +0000 Tyler Durden 495011 at Commodities Are Crashing Amid Stock-Bond Disconnect Deja Vu <p><strong>UPDATE: S&amp;P and 30Y have recoupled post EU close...</strong></p> <p><a href=""><img alt="" src="" style="width: 600px; height: 354px;" /></a></p> <p>&nbsp;</p> <p>Well it wouldn&#39;t be the US trading session if bonds and stocks didn&#39;t decouple from one another&#39;s reality...</p> <p>&nbsp;</p> <p><a href=""><img height="714" src="" width="600" /></a></p> <p>&nbsp;</p> <p>But what happens when Europe closes?</p> <p><a href=""><img height="477" src="" width="600" /></a></p> <p>&nbsp;</p> <p>But Russell is still red...</p> <p><a href=""><img height="552" src="" width="600" /></a></p> <p>&nbsp;</p> <p>Silver and Crude getting flushed into EU Close...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 425px;" /></a></p> <p>&nbsp;</p> <p>Silver just broke below $17...</p> <p><a href=""><img alt="" src="" style="width: 600px; height: 314px;" /></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="845" height="1006" alt="" src="" /> </div> </div> </div> Crude Reality Tue, 30 Sep 2014 15:15:41 +0000 Tyler Durden 495010 at Eurostat Fabricates European Inflation Data, Apologizes <p>When it comes to openly fabricating data, 2014 was bad for goalseeked data quality control: first it was the <a href="">ISM's infamous climategate</a>, where for some reason everyone in the organization missed that the June press release contained a wrong seasonal adjustment factor (why one <em>seasonally adjusts </em>a <strong>survey </strong>is still clear to nobody), and then even more comically, after releasing <a href="">absolutely terrible jobs data in August</a>, Canada laughably revised it to <em>far above the highest estimate</em>, in the process confirming that both ISM and Canadian jobs data is absolute rubbish and is made up on the fly to satisfy ministry of truth mandates. </p> <p>Now we can add European inflation data, because apparently this morning's Eurostat release, which showed the lowest headline inflation since 2009 and the lowest core inflation ever was not precleared by Europe ex-Goldmanite money printer, Mario Draghi, <a href="">and as a result this</a>...</p> <p><a href=""><img src="" width="600" height="505" /></a></p> <p>became this...</p> <p><a href=""><img src="" width="600" height="499" /></a></p> <p>&nbsp;</p> <p>But at least Eurostat was kind enough to apologize that it had released made up data (on both accounts). </p> <p><img src="" width="600" height="158" /></p> <p>That's ok: we forgive you dear Eurocrats for making it clear that European inflation data is merely the latest data point that has absolutely zero credibility and is merely goalseeked to "validate" and fast-track the ECB's money printing which has long since been decided.</p> <p><em>Source: <a href="">Eurostat</a>, for those who wish to forgive Eurostat personally, <a href="">may do so here</a>. </em></p> Climategate Tue, 30 Sep 2014 14:59:03 +0000 Tyler Durden 495009 at Did The Winter War Just Begin? Russian Gas Supplies To Europe Plunge 15%, Ukraine Transit Slashed 54% <p>Just <a href="">a week ago</a>, the Russian energy minister made the first public 'threat' of gas supply "throttling" disruptions to Europe but judging by the data that has just been released, it appears the 'throttling' has begun. Bloomberg reports that<strong> Russian gas supplies to Europe fell 15% year-over-year in Q3 - the most in over two years - as natural gas transit through Ukraine plunged 54% year-over-year</strong>. In 2013, Gazprom sent 60% of its supply via Ukraine pipelines, in August that dropped to 39%, and in September only 34%. Of course, <a href="">Europe remains confident its storage efforts will buffer any "Winter War" disruptions, as we noted here</a>, but as Citi warned previously, "if colder weather arrives, storage levels will be drained," and then there is the Spring (and German industry needs).</p> <p><em>As Bloomberg reports,</em></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong>Russian 3Q Gas Supplies to Europe Drop ~15% Y/y, Most in 2 Yrs</strong></span></p> <p>&nbsp;</p> <p>Export outside CIS in 3Q set to decline to ~34bcm from 40.4bcm last yr; biggest drop since at least 2Q 2012, according to Bloomberg calculations, based on preliminary data of Russian Energy Ministry’s CDU-TEK unit.</p> <p>&nbsp;</p> <p>Exports fell 15% in 2Q 2012; decreased 25% in 3Q 2010</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Russia Cuts Sept. Natgas Transit Via Ukraine 54% Y/y to 3.7Bcm</strong></span></p> <p>&nbsp;</p> <p>Russia’s natgas transit through Ukrainian pipelines continues decreasing; it dropped to ~3.7bcm this mo. vs 4.5bcm in Aug. and 8.1bcm in Sept. 2013, according to Bloomberg calculations, based on website data from Ukraine’s pipeline operator UkrTransGaz, Energy Ministry.</p> <p>&nbsp;</p> <p>Transit to EU ~3.5bcm in Sept. vs 4.4bcm in Aug.</p> <p>&nbsp;</p> <p>Total Russian deliveries via Ukraine in Jan.-Sept. ~50bcm vs 62.5bcm yr earlier</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>Gazprom Cuts Sept. Transit Via Ukraine to 34% of Exports</strong></span></p> <p>&nbsp;</p> <p>Gazprom sent ~34% of Sept. natgas exports outside CIS using Ukrainian pipelines vs 39% last mo., ~60% in Sept. 2013, according to Bloomberg calculations based on preliminary data from Ukraine’s pipeline operator UkrTransGaz, energy ministries of Ukraine, Russia.</p> <p>&nbsp;</p> <p>Ukraine transshipped ~42% of Russian gas to Europe in Jan.-Sept. vs 51% last yr</p> <p>&nbsp;</p> <p>UkrTransGaz ships Russia’s gas to borders w/ Moldova, 4 EU countries: Poland, Hungary, Slovakia, Romania, which&nbsp;&nbsp;&nbsp; delivers some volumes to Turkey</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><a href=""><span style="text-decoration: underline;"><strong>Who will be hurt most?</strong></span></a></p> <p><a href=""><img src="" width="555" height="414" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p><a href="">As we discussed before, Europe is confident it can withstand a disruption as it has been storing gas ahead of the winter. </a></p> <p><a href=""><img src="" width="600" height="399" /></a></p> <p>However...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>European storage facilities contained a record 75.7 billion cubic meters (2.7 trillion cubic feet) of gas yesterday, making them more than 91 percent full, according to Gas Infrastructure Europe, a Brussels-based lobby group.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>“If colder weather arrives, then storage levels could well be drained,” Citigroup said.</strong></span></p> </blockquote> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="511" height="396" alt="" src="" /> </div> </div> </div> Citigroup Hungary Natural Gas Poland Romania Slovakia Turkey Ukraine Tue, 30 Sep 2014 14:39:28 +0000 Tyler Durden 495008 at America's "All Important" Housing Market Flashing Red After Bad Data Double Whammy <p>Those who read Zero Hedge regularly will be aware that for us no other regional US housing market is more important than that of the San Francisco. <a href="">Recall from June</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>When it comes to critical housing markets in the US, none is more important than San Francisco.<strong>&nbsp;</strong></p> <p>&nbsp;</p> <p><strong>Courtesy of its location, not only does it reflect the general Fed-driven liquidity bubble which is the tide rising all housing boats across the US, but due to its proximity to both Silicon Valley and China, it also benefits from two other liquidity bubbles: that of tech, and of course, the Chinese $25 trillion financial debt monster, where since the local housing bubble has burst, local oligarchs have no choice but to dump their cash abroad.</strong></p> <p>&nbsp;</p> <p>It is no surprise that during ever single previous bubble peak, San Francisco home prices managed to post a 20% annual increase, starting with the dot com bubble in the year 2000, the first (not to be confused with the current) housing bubble peaking around 2005, and then the European sovereign debt bubble.</p> <p>&nbsp;</p> <p>Which is why, while today's Case Shiller data was widely disappointing across the board, indicating a significant slowdown in price gains (and on a sequential seasonally adjusted basis, practically a decline), the one market we paid particular attention to was San Francisco. What we found is a red flag for everyone waiting to time the bursting of the latest housing bubble. Because after an unlucky 13 months of posting consecutive 20% Y/Y price gains, the San Francisco bubble appears to have finally burst, posting "just" an 18.2% price increase, the lowest since January of 2013.</p> </blockquote> <p>Well, in the aftermath of <a href="">yesterday's data </a>which beyond a reasonable doubt showed that the Chinese housing bubble has burst, we can now report that the "flashing red" market that is San Francisco was just smacked by a "double whammy" perfect storm, when not only was the annual increase in home prices the lowest it has been since October 2012 (but in the wrong direction), and next month the July double-digit Y/Y increase of 10.3% will once again be single digits, first positive and soon negative, an inflection which has in the past only happened when a major bubble has just burst as shown below...</p> <p><a href=""><img src="" width="600" height="434" /></a></p> <p>&nbsp;</p> <p>... but that according to the just reported Case Shiller data, San Francisco was also the <em><strong>only city to see a monthly decline </strong></em>in house prices...</p> <p><a href=""><img src="" width="600" height="399" /></a></p> <p>... which now also means that the ultra high end of US housing is now sliding fast, and that unless some other central banks steps up and resumes the injections of some $100 billion in outside money into inflating asset prices such as stocks and billionaire mansions, then all bets are soon off. </p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="815" height="590" alt="" src="" /> </div> </div> </div> Central Banks China Housing Bubble Housing Market Liquidity Bubble None Sovereign Debt Tue, 30 Sep 2014 14:12:52 +0000 Tyler Durden 495006 at