en Free College Wasn't Just A Give Away – It Was A Trial Balloon <p><a href=""><em>Submitted by Mark St.Cyr</em></a>,</p> <p><strong>Over the past few weeks one could not escape the headline of the latest proposal to give away two years of community college.</strong> Everywhere it was debated by pundits whether it was a &ldquo;good thing,&rdquo; or a &ldquo;bad idea&rdquo;. &ldquo;Who would, in the end, pay?&rdquo; &ldquo;Who would be eligible?&rdquo; &ldquo;Who wouldn&rsquo;t? So on, and so forth. (for as we all know when you receive something for &ldquo;free&rdquo; there&rsquo;s always a catch)</p> <p><strong>One of the details that was missed early on that finally made its way into the discourse was that &ldquo;free&rdquo; actually meant it was going to be paid for via the rescinding of the 529-Plan. </strong>A plan used primarily by the middle class as a way to help pay the onerous ever rising costs of college. A college by the way &ndash; of choice. i.e., A school they deem as being more noteworthy (or resume enhancing) than the typical community college.</p> <p><u><strong>Of course once this detail became apparent there was an outpouring of outrage. So much so that the idea was pulled and shelved nearly as fast as it came on the scene. This doesn&rsquo;t happen that often. Rarely does a &ldquo;give-away&rdquo; initiative that&rsquo;s designed to have all the right target buttons to be pushed leave the political arena before it&rsquo;s been thoroughly fear mongered, class envied, and argued to death in the public square.</strong></u></p> <p>With at least 6 months if not more to go before any real political campaigns start in earnest for the next cycle, one would think this was just what a political debate vacuum would want. It had all the ingredients adored by political parties to throw barbs from podiums at the other side. (no matter the side) It is a perfect debate vehicle even if there&rsquo;s no chance of it ever going thru. Because we all know; it really doesn&rsquo;t matter at the time if an idea has a chance in passing. Rather, it&rsquo;s more important the argument can be used to bludgeon your opponent. For that&rsquo;s a far better use for results. Yet, this one was like a flash in the pan idea. Before the debate even started it was squelched and withdrawn. Why?</p> <p>Many will say it didn&rsquo;t have a snowball&rsquo;s chance in you know where once some of the details became apparent. Sure, I can agree to that. However, what if the real reason had nothing to do with funding college: and had everything to do with setting a precedent? A precedent as to soften the masses up on the idea of trading or exchanging a tax deferred program (as in your 529 tax deferred nest egg) for a shiny new government backed program. All for &ldquo;free.&rdquo;</p> <p>So you&rsquo;re think &ldquo;Yeah, yeah, yeah, what else is new.&rdquo; And again I would agree with that . But here&rsquo;s the issue that one must consider. What struck me was the fact in just how fast this proposal went away. Then it began to dawn on me. <strong>This has &ldquo;trial ballooning 101&Prime; written all over it. We&rsquo;ve seen it so many times before regardless of party. So may times in fact we&rsquo;ve drawn oblivious to it.</strong></p> <p>So, what is the real idea behind this probable balloon? Why even bring this into the public debate at all; especially now? It&rsquo;s not like they need private institutions to bank roll higher learning any longer. That was basically done away with just a few years ago when the administration took over the entire student loan program. They now currently control it.</p> <p><strong>Tweaks, changes, special financing and more could all be done with basically &ldquo;strokes of the pen.&rdquo; There just has to be something here more than what typically meets the eye. Then it hit me: Replace 529 with 401K &ndash; and change college to retirement. Same premise, just the severity of outcomes changed. Which is why I believe it was a trial balloon idea to see the reaction to the underlying argument that was first and foremost the reasons to bring it forward.</strong></p> <p>If one remembers back in the early days of the financial crisis when it seemed all heck was breaking loose the then House Speaker was appearing on nearly every financial media channel touting the idea that maybe &ldquo;The government should institute a program where people could turn over their 401K plans for a secured government bond.&rdquo;</p> <p>I remember at the time listening slack-jawed not only for the implications of such an idea. Rather, it was the brevity along with just how fast this idea came to light. It wasn&rsquo;t as if there was a large vibrant ongoing debate. This seemed to come out-of-the-blue as a neatly packaged idea ready for anyone else (politically or via the populace at large) to jump on board and help push, or run with it. However, it too went away seemingly just as fast and was shelved.</p> <p><u><strong>I believe &ldquo;shelved&rdquo; is a very instructive word. For it implies: Ready to go when or if needed &ndash; again.</strong></u> These types of ideas don&rsquo;t seem to be spontaneously derived, or a serendipitous bubbling out of the political ether. No, usually they are constructed far in advance then shelved waiting for the &ldquo;right time&rdquo; to either impose &ndash; or float for the future.</p> <p>Many have written and spoke on the subject that the government in one form or another wants to get access (whether to tax or confiscate) the large pool of money that sits currently beyond their reach within the 401K structure. And nothing burns a hole in a politicians pocket faster than knowing there&rsquo;s a great big ole pile of money somewhere within the financial system.</p> <p><strong>The only problem? Currently they can&rsquo;t get access to it. </strong>(Regardless of party affiliation) But one should not think the political class doesn&rsquo;t lay awake sleepless thinking about ways to garner access to it &ndash; just as often as one does the same for the opposite effect.</p> <p>I believe it would be prudent for anyone to consider with what is currently going on within the financial markets globally, as well as the possible contagion concerns that may raise their ugly heads: trial balloons for the sole purpose of setting precedents for the explicit reasons which have to do with giving up tax sheltering vehicles in turn for &ldquo;free&rdquo; government backed or supplied ____________(fill in the blank) should not be lost on those watching these horizons for clues.</p> <p>Remember, it wasn&rsquo;t all that long ago people awoke to the change that their &ldquo;cash&rdquo; in a money market account no longer needed to be worth what their balance stated. It can now float via market forces along with being gated if necessary. The response? (Insert crickets here)</p> <p><strong>Currently if it were proposed forthright one could (or should) access &ldquo;free&rdquo; (i.e. wont be subject to negative interest rates) government back bonds; and all you needed to do to access this &ldquo;great benefit&rdquo; was to turn over your 401K plan? The alarm bells and uproar that would ensue would be fierce one would believe. Yet, the idea of negative interest rates just a few years ago was also considered &ldquo;unimaginable.&rdquo; Now? It&rsquo;s becoming commonplace.</strong></p> <p>I feel the only way to re-engage in that conversation without a knee-jerk rebuttal of out right refusal would be if you first laid the premise and groundwork of another, yet smaller scale of the same idea gaining (or allowing) the acceptance of such a proposal first. i.e., The tax protected 529-Plan for a government supplied &ldquo;freebie.&rdquo;</p> <p><u><strong>Move that idea into the public. Find acceptance. (even if it&rsquo;s small at first) Then: you can move the ladder quickly and propose the same idea or premise, only this time&nbsp; &ndash; it&rsquo;s the 401K for a government bond. Or as I said earlier, &rdquo; _______________(fill in the blank.)&rdquo;</strong></u></p> <p>No one knows whether this is the true except for those who float these type of ideas. Yet, one must take heed as to look out at the current financial landscape with all the possible contagion risks rearing their ugly heads within both the Euro Zone and more; and not be on high alert to the possibility things could once again: get very ugly &ndash; very fast.</p> <p>With Greece leading the way to a possible EU breakdown along with hundreds of thousands now filling the public square in Spain to possibly do the same. <strong>The Federal Reserve along with most other politicians have to be a little more than concerned that things aren&rsquo;t quite playing out as the &ldquo;text books&rdquo; stated they should.</strong></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="971" height="624" alt="" src="" /> </div> </div> </div> Bond Federal Reserve Greece Sun, 01 Feb 2015 22:00:03 +0000 Tyler Durden 501274 at Ukraine "Truce"? Tanks Are Rolling In Poland As NATO Plans Permanent Eastern European Bases <p>With Ukraine, Germany, and France all expressing their <strong>concern this morning about "conflict escalation"</strong> between pro-Russian separatists and the Ukraine military, the so-called "truce" appears to be hanging by a thread of semanticism (despite OSCE's please for respect of the cease-fire and the demarcation line). Today's triple whammy of 'escalation' appears more focused on the non-Russian side as first, <strong>France begins sending tanks into Poland</strong>; second, <strong>Ukraine shifts its tanks to the front-line</strong>; and third - and potentially most inflammatory for Putin - <strong>NATO has confirmed plans to create permanent command centers in Eastern Europe</strong>. Putin has not responded yet but reports of <strong>'nuclear bombers' flying above the English Channel "with transponders turned off,"</strong> suggests the sabre rattling continues.</p> <p>&nbsp;</p> <p>Ukrainian civilians are being evacuated:</p> <ul> <li><strong>*UKRAINE EVACUATED 1,000 PEOPLE FROM DEBALTSEVE YDAY</strong></li> <li>*7 CIVILIANS DEAD, 4 WOUNDED IN DONETSK REGION IN 24 HRS: POLICE</li> <li>*11 SERVICEMEN ALSO INJURED IN MILITARY CAMP BLAZE, IFX SAYS</li> </ul> <p>The OSCE is calling for the truce to stand...</p> <ul> <li><strong>*OSCE'S DACIC SAYS MAXIMUM EFFORTS MADE TO END UKRAINE VIOLENCE</strong></li> <li><strong>*OSCE CALLS FOR CEASE-FIRE, RESPECT FOR DEMARCATION LINE: DACIC</strong></li> <li><strong>*OSCE'S DACIC SAYS NO ONE CONSIDERING NEW UKRAINE PLAN FOR NOW</strong></li> </ul> <p>Everyone is "concerned"</p> <ul> <li>*POROSHENKO, MERKEL, HOLLANDE DISAPPOINTED BY MINSK TALKS</li> <li>*POROSHENKO CALLS FOR RUSSIAN REACTION TO UKRAINE TALKS FAILURE</li> <li><strong>*UKRAINE, GERMANY, FRANCE CONCERNED ABOUT CONFLICT ESCALATION</strong></li> </ul> <p><strong>Leaders call for immediate “cease-fire” to fighting in east Ukraine after speaking on the phone today, AFP says, citing the French president’s staff.</strong></p> <p>So the following takes place:</p> <p>1)<span style="text-decoration: underline;"><strong> <a href="">France starts sending tanks into Poland...</a></strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>France is pledging tanks and armored vehicles to bolster NATO forces in Poland, where leaders are increasingly uneasy about Russia. </strong></p> <p>&nbsp;</p> <p>In a joint statement Friday after a meeting between French President Francois Hollande and Polish Prime Minister Eva Kopacz, the two governments also called for a cease-fire in eastern Ukraine, where fighting has intensified between pro-Russia separatists and government troops.</p> <p>&nbsp;</p> <p>NATO has no permanent presence in Eastern Europe but since last April members have been cycling forces and military equipment through the region in response to Russia's actions in Ukraine.</p> <p>&nbsp;</p> <p><strong>The French military equipment is expected to remain in Poland for two months.</strong></p> </blockquote> <p>2) <span style="text-decoration: underline;"><strong>Ukraine begins moving its tanks to the front-line in Eastern Ukraine</strong></span></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><iframe src="" width="560" height="315" frameborder="0"></iframe></p> </blockquote> <p>and 3) <a href=""><span style="text-decoration: underline;"><strong>NATO Plans New Permanent Command Centers in Eastern Europe</strong></span></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>NATO said Friday it will deploy small units in six eastern European nations to help coordinate a spearhead force set up in response to Russia's actions in Ukraine.</strong></p> <p>&nbsp;</p> <p><strong>NATO Secretary General Jens Stoltenberg said the units in Estonia, Latvia, Lithuania, Poland, Bulgaria and Romania will be the first of their kind there.</strong></p> <p>&nbsp;</p> <p>Defense ministers from the 28-nation military alliance will discuss the full force, which can react quickly to any hotspots in Europe, when they meet on Feb. 5.</p> <p>&nbsp;</p> <p>Stoltenberg said countries responsible for providing the several thousand troops should be known next week.</p> <p>&nbsp;</p> <p>The forward units will comprise a few dozen troops only. <strong>They will plan and organize military exercises, and provide command and control for any reinforcements the force might require.</strong></p> <p>&nbsp;</p> <p>"They're going to plan, they're going to organize exercises, to provide ... some key command elements for reinforcements," Stoltenberg said.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Russia has been very quiet today as all of this has occurred but we suspect the last move - NATO bases so close to Russia's border - will warrant some response very rapidly... or perhaps Putin already pre-empted it...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><span style="text-decoration: underline;"><strong><a href="">Putin Sends Nuclear Bombers Over English Channel: “Transponders Turned Off… Invisible to Air Traffic Control”</a></strong></span></p> <p>&nbsp;</p> <p>The U.K.’s Royal Air Force scrambled fighter jets on Thursday after a pair of nuclear-capable Russian bombers flew across a busy civilian air traffic corridor above the English Channel. <strong>The bombers had their transponders turned off, British officials said, making them invisible to many air traffic control systems.</strong> The incident disrupted multiple flights – and ended with the U.K. government demanding the Russian ambassador appear at the Foreign Office to explain the actions.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>This is not going to end well.</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="622" height="408" alt="" src="" /> </div> </div> </div> Bulgaria Eastern Europe Estonia France Germany Latvia Lithuania Poland Romania Ukraine Sun, 01 Feb 2015 21:15:42 +0000 Tyler Durden 501273 at Europe Fractures: France "Prepared To Support Greece" In Debt Renegotiations <p>Despite Angela Merkel's insistence on numerous occasions this past week that there will be "no debt renegotiations," it appears a schism at the core of Europe is opening. <a href="">As France24 reports,</a> following a meeting between France's finance minister Michel Sapin and Greece's finance minister Yanis Varoufakis, the press conference had a considerably more amicable tone that Friday's Dijsselbloem dissing. <strong><em>"France is more than prepared to support Greece," Sapin said adding that Greece’s efforts to renegotiate were "legitimate."</em></strong> Sapin urged a "new contract between Greece and its partners."</p> <p>&nbsp;</p> <p><a href=""><em>As France24 reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>France’s Socialist government offered support Sunday for Greece’s efforts to renegotiate debt for its huge bailout plan, amid renewed fears about Europe’s economic stability.</p> <p>&nbsp;</p> <p>The backing was a victory for Greek Finance Minister Yanis Varoufakis, holding talks with European officials to push for new conditions on debt from creditors who rescued Greece’s economy to save the shared euro currency. Worries have mounted that Greece’s new far left government might not pay back its debts.</p> <p>&nbsp;</p> <p>Varoufakis is also visiting London and Rome – and said Sunday that he would visit Berlin. The German government has been particularly angry at the new Greek government’s position and bluntly rejected suggestions that Greece should be forgiven part of its rescue loans.</p> <p>&nbsp;</p> <p>Varoufakis insisted that Greece wants to pay the money back, but said he wants new terms and new negotiating partners, arguing that “it’s not worth” discussing with the so-called “troika” of creditors who set the strict terms for Greece’s rescue.</p> <p>&nbsp;</p> <p>France’s Socialist leadership, whose president has campaigned against austerity, presented itself Sunday as a possible mediator between Greece and creditors.</p> <p>&nbsp;</p> <p>French Finance Minister Michel Sapin insisted his country wouldn’t support canceling the debt, but offered support for a new timeframe or terms.</p> <p>&nbsp;</p> <p><strong>“France is more than prepared to support Greece,” Sapin said after meeting Varoufakis, saying Greece’s efforts to renegotiate were “legitimate.” Sapin urged a “new contract between Greece and its partners.”</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Perhaps Merkel should remember her nation's own history?</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Marina Prentoulis, a senior lecturer at the University of East Anglia and Syriza’s London spokesman, said that Europe’s austerity drive had left an entire generation in Greece with “no future”.</p> <p>&nbsp;</p> <p>"We are not going to enforce the austerity programmes, what we call the memoranda, it created a huge humanitarian crisis, she said. People have been working all their lives and their pensions have been slashed to 40pc," she told the BBC's Andrew Marr Show.</p> <p>&nbsp;</p> <p>"We have huge unemployment – 27pc. And 60pc for young people. This means that they have created a generation that has effectively no future. They have destroyed any employment rights. So this has to stop. This programme Syriza has pledged is not going to be enforced any more."</p> <p>&nbsp;</p> <p><strong>Angela Merkel, the German Chancellor, has ruled-out cancelling more of Greece's national debt, which has climbed to more than 175pc of gross domestic product (GDP). However, <span style="text-decoration: underline;">Ms Prentoulis said Germany should "remember it’s own history".</span></strong></p> <p>&nbsp;</p> <p><strong>"In 1953 a big part of the German debt was written off and then the repayments were associated with growth. This is what Syriza is asking for Greece as well,"</strong> she said.</p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>European Dis-Union once again!!!</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="1040" height="619" alt="" src="" /> </div> </div> </div> Creditors France Germany Greece Gross Domestic Product National Debt Unemployment Sun, 01 Feb 2015 21:10:48 +0000 Tyler Durden 501293 at TRIuMPH OF THE BoWL... <p><iframe src="" width="1024" height="686" frameborder="0"></iframe></p> Sun, 01 Feb 2015 21:08:07 +0000 williambanzai7 501292 at Could the US Dollar Carry Trade Crash Stocks? <p>For 30+ years, Western countries have been papering over the decline in living standards by issuing debt. In its simplest rendering, sovereign nations spent more than they could collect in taxes, so they issued debt (borrowed money) to fund their various welfare schemes.</p> <p>This was usually sold as a &ldquo;temporary&rdquo; issue. But as politicians have shown us time and again, overspending is <em>never</em> a temporary issue. This is compounded by the fact that the political process largely consists of promising various social spending programs/ entitlements to incentivize voters.</p> <p>In the US today, a whopping 47% of American households receive some kind of Government benefit. This type of social spending is not temporary&hellip; this is endemic.</p> <p><strong>The US is not alone&hellip; Most major Western nations are completely bankrupt due to excessive social spending. And ALL of this spending has <em>been fueled by bonds</em>.</strong></p> <p>This is why Central Banks have done everything they can to stop any and all defaults from occurring in the sovereign bonds space. Indeed, when you consider the bond bubble <strong><u>everything Central Banks have done begins to make sense.</u></strong></p> <p>1.&nbsp;&nbsp;&nbsp;&nbsp; Central banks cut interest rates to make these gargantuan debts more serviceable.</p> <p>2.&nbsp;&nbsp;&nbsp;&nbsp; Central banks want/target inflation because it makes the debts more serviceable and puts off the inevitable debt restructuring.</p> <p>3.&nbsp;&nbsp;&nbsp;&nbsp; Central banks are terrified of <em>debt</em> <em>deflation </em>(Fed Chair Janet Yellen herself admitted that oil&rsquo;s recent deflation was economically positive) because it would burst the bond bubble and bankrupt sovereign nations.</p> <p>So how will all of this play out?</p> <p>The first real sign of trouble has already emerged. That sign pertains to the US Dollar.</p> <p>Globally, the world is awash in borrowed money&hellip; <em>most of it in US Dollars</em>. The US Dollar carry trade is north of $9 trillion&hellip; <strong><u>literally than the economies of Germany and Japan COMBINED.</u></strong></p> <p>When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies&hellip; you have to cover your SHORT or you blow up.</p> <p>And the US Dollar has been rallying&hellip; HARD. Indeed, the move that began in July is already on par in scope with that which occurred during the 2008 meltdown:</p> <p><img alt="" src="" style="width: 460px; height: 284px;" /></p> <p>This first wave imploded the price of Oil, numerous other commodities, and several emerging markets equities, most notably in Russia and Brazil.</p> <p>However, the US markets are not immune to the move.</p> <p>Indeed, as ZH noted earlier this week, 87% of companies have guided below consensus expectations for next quarter. The stronger US Dollar is hurting profits&hellip; which are the single biggest driver of stock prices.</p> <p><strong>What happened the last time that stocks were strongly disconnected from reality&hellip; and the US Dollar began to rally hard?</strong></p> <p><img alt="" src="" style="width: 460px; height: 284px;" /></p> <p><strong>Be prepared.</strong></p> <p>&nbsp;</p> <p>If you&rsquo;ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report <strong><em>Financial Crisis &quot;Round Two&quot; Survival Guide </em></strong>that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.</p> <p>You can pick up a FREE copy at:</p> <p><a href=""></a></p> <p>Best Regards</p> <p>Phoenix Capital Research</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> Bond Brazil Carry Trade Central Banks Germany Janet Yellen Japan Meltdown Reality Sun, 01 Feb 2015 20:51:39 +0000 Phoenix Capital Research 501290 at The Euro Tragedy & Its Consequences For Gold <p><a href=""><em>Submitted by Alasdair Macleod via GoldMoney</em></a>,</p> <p><em>Despite the uncertainties ahead of the Greek general election, the European Central Bank (ECB) went ahead and announced quantitative easing (QE) of €60bn per month from March to at least September 2016.</em></p> <p><strong>What makes this interesting is the mounting evidence that QE does not bring about economic recovery.</strong> Even Jaime Caruana, General Manager of the Bank for International Settlements and who is the central bankers' central banker, has publicly expressed deep reservations about QE. However, the ECB ploughs on regardless.</p> <p><strong>The Keynesians at the ECB are unclear in their thinking. </strong>They are unable to answer Caruana's points, dismissing non-Keynesian economic theory as "religion", and they sweep aside the empirical evidence of Keynesian policy failures. Instead they are panicking at the spectre of too little price inflation, the continuing fall in Eurozone bank lending and now falling commodity prices. To them, it is a situation that can only be resolved by monetary stimulation of aggregate demand applied through increased government deficit spending. </p> <p>This is behind the supposed solution of the ECB's QE, most of which will involve national central banks in the euro-system propping up their own national governments' finances.</p> <p><strong>The increased socialisation of the weaker Eurozone economies, especially those of France, Greece, Italy, Spain and Portugal, will inevitably lead to unnecessary economic destruction. QE always transfers wealth from savers to financial speculators and other early receivers of the new money. Somehow, the impoverishment of the working and saving masses for the benefit of the central bankers' chosen few is meant to be good for the economy.</strong></p> <p>Commercial banks will be corralled into risk-free financing of their governments instead of lending to private enterprise. This is inevitable so long as the Single Supervisory Mechanism (the pan-European banking regulator) with a missionary zeal is discouraging banks from lending to anyone other than governments and government agencies. So <strong>the only benefit to employment will come from make-work programmes</strong>. Otherwise unemployment will inevitably increase as the states' shares of GDP grow at the expense of their private sectors as the money and bank credit shifts from the former to the latter: <strong>this is the unequivocal lesson of history.</strong></p> <p><strong>It may be that by passing government financing to the national central banks, the newly-elected Greek government can be bought off. It will be hard for this rebelling government to turn down free money, however angry it may be about austerity.</strong> But this is surely not justification for a Eurozone-wide monetary policy. While the Greek government might find it easier to appease its voters, courtesy of easy money through the Bank of Greece, hard-money Germans will be horrified. It may be tempting to think that the ECB's QE relieves Germany from much of the peripheral Eurozone's financing and that Germans are therefore less likely to oppose the ECB's QE. Not so, because the ECB is merely the visible head of a wider euro-system, which includes the national central banks, through which there are other potential liabilities.</p> <p><strong>The principal hidden cost to Germany is through the intra-central bank settlement system, TARGET2, which should only show minor imbalances. </strong>This was generally true before the banking crisis, but since then substantial amounts have been owed by the weaker southern nations, notably Italy, to the stronger northern countries. Today, the whole of the TARGET2 system is being carried on German and Luxembourg shoulders as creditors for all the rest. Germany's Bundesbank is owed €461bn, a figure that is likely to increase as the debtors' negative balances continue to accumulate.</p> <p><span style="text-decoration: underline;"><strong>The currency effect</strong></span></p> <p>The immediate consequence of the ECB's QE has been to weaken the euro against the US dollar, and importantly, it has forced the Swiss franc off its peg. The sudden 20% revaluation of the Swiss franc has generated significant losses for financial institutions which were short of the franc and long of the euro, which happens to have been the most important carry-trade in Europe, with many mortgages in Central and Eastern Europe denominated in Swiss francs as well. The Greek election has produced a further problem with a developing depositor run on her banks. Doubtless both the carry-trade and Greek bank problems can be resolved or covered up, but problems such as these are likely to further undermine international confidence in the euro, particularly against the US dollar,<strong> forcing the US's Fed to defer yet again the day when it permits interest rates to rise.</strong></p> <p>This was the background to the Fed's Open Market Committee (FOMC) meeting this week, and the resulting press release can only be described as a holding operation. Statements such as "the Committee judges that it can be patient in beginning to normalise the stance of monetary policy" are indicative of fence-sitting or lack of commitment either way. <strong>It is however clear that despite the official line, the US economy is far from "expanding at a solid pace" (FOMC's words) and external events are not helping either. For proof of that you need look no further than the slow-down of America's overseas manufacturing and production facility: China.</strong></p> <p><span style="text-decoration: underline;"><strong>The consequences for gold</strong></span></p> <p><strong>Until now, central banks have restricted monetary policy to domestic economic management; this is now evolving into the more dangerous stage of internationalisation through competitive devaluations.</strong> We now have two major currencies, the yen and the euro, whose central banks are set to weaken them further against the US dollar. Sterling, being tied through trade with the euro, should by default weaken as well. To these we can add most of the lesser currencies, which have already fallen against the dollar and may continue to do so. The Fed's 2% inflation target will become more remote as a consequence, and this is bound to defer the end of zero interest rate policy. So from all points of view competitive devaluations should be good for gold prices.</p> <p><strong>This is so far the case, with gold starting to rise against all major currencies, including the US dollar, with the price above 200-day and 50-day moving averages in bullish formation.</strong> To date from its lows gold has risen by up to 13% against the USD, 18% against the pound, 30% against the euro, and 32% against the yen. The rise against weaker emerging market currencies is correspondingly greater, fully justifying Asian caution about their government currencies as stores of value.</p> <p><strong>We know that Asian demand for bullion has absorbed all mine production, scrap and net selling of investment gold from advanced economies for at least the last two years.</strong> Indeed, the bear market in gold has been a process of redistribution from weak western into stronger eastern hands. So if there is a revival in physical demand from the public in these advanced economies it is hard to see how it can be satisfied at anything like current prices, with physical bullion now in firm hands.</p> <p><span style="text-decoration: underline;"><strong>The gold price is an early warning of future monetary and currency troubles, and it is now becoming apparent how they may transpire.</strong></span> The ECB move to give easy money to profligate Eurozone politicians is likely to have important ramifications well beyond Europe, and together with parallel actions by the Bank of Japan,<strong> can now be expected to increase demand for physical gold in the advanced economies once more.</strong></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="350" height="228" alt="" src="" /> </div> </div> </div> Bank of Japan Bear Market Central Banks China Creditors default Deficit Spending Eastern Europe European Central Bank Eurozone France Free Money Germany Greece Italy Japan Monetary Policy Moving Averages Portugal Quantitative Easing recovery Swiss Franc Unemployment Yen Sun, 01 Feb 2015 20:30:44 +0000 Tyler Durden 501271 at USDJPY Tumbles, BofA Stopped Out: New "Tom Stolper" Crowned <p>Five days ago, when previewing an event that could be the Holy Grail for FX traders in 2015, <a href="">we wrote</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>In the epic alpha vacuum left in the absence of the worst, pardon, best FX "analyst" of all time, Goldman's legendary Tom Stolper, whose perpetual fading helped us and countless readers generate some 10,000+ pips in profits in the years when he was actively crucifying muppets on Goldman's payroll, most were confused how to make profits with absolutely no risk in the FX sapce. And ever since when rading alongside major central banks led to career-ending outcomes as recently as 2 weeks ago, it seemed that the entire FX space was merely populated by algos and other robots who would merely frontrun each other's cluelessness in perpetuity.</p> <p>&nbsp;</p> <p>We are happy to report that the P&amp;L drought may have finally ended, and we have none other than the man many have suggested could be next in line for the title of honorary "Tom Stolper" of the FX realm: BofA's technical strategist MacNeill Curry. <strong>Moments ago, Curry came out with a trade reco which is, not surprisingly, just in line with what the vast consensus, and not to mention the Bank of Japan, thinks: <em>long USDJPY</em>, aka the trade that is directly proportional to multiple expansion for the entire US stock market, and number of bankrupt Japanese corporations.</strong></p> </blockquote> <p>BofA's reco in question:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Buy $/¥ at market (now 117.80), <span style="text-decoration: underline;">risk 117.25</span>, target 119.78, potentially120.36&nbsp; </strong></p> <p>&nbsp;</p> <p>For the past week, $/¥ has been caught in a 118.72/117.32 contracting range / Triangle formation. Now, that range is about to complete for a push towards 119.78/120.36. Perhaps most compelling is the risk to the trade. Price should not trade below the Jan-25 low at 117.27. Below here invalidates the bullish setup and results in a larger, choppier range than anticipated. Bigger Picture, we remain BULLISH. The long term uptrend remains incomplete for a push towards 124.16/124.59. Above the Dec-23 high at 120.83 says the long term bull trend has resumed.&nbsp;</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><strong>&nbsp;</strong><a href=""><img src="" width="600" height="323" /></a></p> </blockquote> <p>Our conclusion:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>[W]ill USDJPY tumble promptly back down to 117.25 at which point Curry will be Stolpered out, and we can crown the next market-moving "Stolper" whose every reco will be the source of much mirth and joy in the new and improved "bandits" and "cartel" chat room, </strong>or will the forces of momentum-chasing vacuum tubes win, and the quest for the next Stolper continue unsuccessfully? We hope to have an answer in the next 2-3 days.</p> </blockquote> <p>Ironically, it was less than 24 hours after the reco that the USDJPY plunged as low as 117.26 (!) last Wednesday, and yet MacNeill's reco was saved literally <strong>by one pip </strong>from being stopped out.... if only for another three trading days. </p> <p>Moments ago, in the illiquid Sunday night pre-market, BofA's "Stolper" was just <span style="text-decoration: line-through;">stolpered</span> stopped out as the USDJPY just tumbled well below 117 on fresh concerns about a Grexit and the <a href="">biggest Chinese manufacturing slowdown </a>in 2 years, dropping to the lowest level since the SNB announcement in just 3 trading days after Curry's initial recommendation, which incidentally is a record short period of time for a "Stolpering", even for the original Tom Stolper.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="313" /></a></p> <p>Which is especially ironic considering just hours ago he reiterated his conviction:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Bullish $/¥, but the Jan-28 low is key </strong> </p> <p>&nbsp;</p> <p>The setup in $/¥ is very similar to that of the S&amp;P500, albeit on a much shorter time horizon. We look for a bullish resolution to the 8d contracting range (shown in blue) for a push towards 119.78/120.36. A break of the Jan-28 low would invalidate this outlook, opening a deeper decline to 115.99/115.56 before renewed basing.&nbsp; </p> </blockquote> <p>Oops. </p> <p>So here's to you, MacNeil Curry: keep those "recos" coming because in the absence of illegal chatrooms and muppet slayers it was getting a little difficult to make riskless profits day in and out.</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="600" height="800" alt="" src="" /> </div> </div> </div> Bank of Japan Central Banks Japan None Stolper Sun, 01 Feb 2015 20:11:48 +0000 Tyler Durden 501278 at "Hottest Year On Record?" Think Again! Meet 'Seasonally-Adjusted' Seasons <p>Day after day in modern macro-economics, investors are bombarded with 'odd' seasonal adjustments that spuriously lift (in the case of growth-related variables) or reduce (in the case of inflation-related variables) data to ensure a constant flow of "we must keep offering free/cheap money" narrative-confirming news.</p> <p>However, <a href="">as The Telegraph reports, </a>it appears this<strong> "seasonal adjustment" smoke-screen has reached the just as bifurcated opinioned world of global warming trends and Climate-Gate</strong>...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Although it has been emerging for seven years or more, one of the most extraordinary scandals of our time has never hit the headlines. </strong>Yet another little example of it lately caught my eye when, in the wake of those excited claims that 2014 was “the hottest year on record”, I saw the headline on a<a href=""> climate blog: “Massive tampering with temperatures in South America”.</a> The evidence on Notalotofpeopleknowthat, uncovered by Paul Homewood, was indeed striking.</p> <p>&nbsp;</p> <p><strong>Puzzled by those “2014 hottest ever” claims,</strong> which were led by the most quoted of all the five official global temperature records – Nasa’s Goddard Institute for Space Studies (Giss) – Homewood examined a place in the world where Giss was showing temperatures to have risen faster than almost anywhere else: a large chunk of South America stretching from Brazil to Paraguay.</p> <p>&nbsp;</p> <p>Noting that weather stations there were thin on the ground, he decided to focus on three rural stations covering a huge area of Paraguay. Giss showed it as having recorded, between 1950 and 2014, a particularly steep temperature rise of more than 1.5C: twice the accepted global increase for the whole of the 20th century.</p> <p>&nbsp;</p> <p><strong>But when Homewood was then able to check Giss’s figures against the original data from which they were derived, he found that they had been altered. Far from the new graph showing any rise, it showed temperatures in fact having declined over those 65 years by a full degree. When he did the same for the other two stations, he found the same. In each case, the original data showed not a rise but a decline.</strong></p> <p>&nbsp;</p> <p>Homewood had in fact <strong>uncovered yet another example of the thousands of pieces of evidence coming to light in recent years that show that something very odd has been going on with the temperature data relied on by the world's scientists</strong>. And in particular by the UN’s Intergovernmental Panel on Climate Change (IPCC), which has driven the greatest and most costly scare in history: the belief that the world is in the grip of an unprecedented warming.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>How have we come to be told that global temperatures have suddenly taken a great leap upwards to their highest level in 1,000 years? In fact, it has been no greater than their upward leaps between 1860 and 1880, and 1910 and 1940, as part of that gradual natural warming since the world emerged from its centuries-long “Little Ice Age” around 200 years ago.</strong></span></p> <p>&nbsp;</p> <p><strong>This belief has rested entirely on five official data records. </strong>Three of these are based on measurements taken on the Earth’s surface, versions of which are then compiled by Giss, by the US National Oceanic and Atmospheric Administration (NOAA) and by the University of East Anglia’s Climatic Research Unit working with the Hadley Centre for Climate Prediction, part of the UK Met Office. The other two records are derived from measurements made by satellites, and then compiled by Remote Sensing Systems (RSS) in California and the University of Alabama, Huntsville (UAH).</p> <p>&nbsp;</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="201" /></a></p> <p>&nbsp;</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>To fill in the huge gaps, those compiling the records have resorted to computerised “infilling” or “homogenising”,</strong></span> whereby the higher temperatures recorded by the remaining stations are projected out to vast surrounding areas (Giss allows single stations to give a reading covering 1.6 million square miles). This alone contributed to the sharp temperature rise shown in the years after 1990.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>But still more worrying has been the evidence that even this data has then been subjected to continual “adjustments”, invariably in only one direction. Earlier temperatures are adjusted downwards, more recent temperatures upwards, thus giving the impression that they have risen much more sharply than was shown by the original data.</strong></span></p> <p>&nbsp;</p> <p>In reality, the implications of such distortions of the data go much further than just representing one of the most bizarre aberrations in the history of science. <strong>The fact that our politicians have fallen for all this scary chicanery has given Britain the most suicidally crazy energy policy (useless windmills and all) of any country in the world.</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>Seaonally-adjusted seasons? Sure, why not!</p> Brazil Global Warming headlines NOAA Reality Sun, 01 Feb 2015 19:45:12 +0000 Tyler Durden 501270 at Denmark Launches "Back-Door QE", Halts Treasury Issuance: Why DKKEUR Could Be The "Trade Of 2015" <p>While much has been said about last week's <a href="">third in two weeks rate cut by the Danish Central Bank</a>, one which brought the deposit rate to -0.50%, having previously cut it to -0.35% and -0.2% in the aftermath of the ECB Q€ and the SNB's abandoning of the Franc ceiling - the latest move of desperation to preserve the peg of the DKK to the plunging Euro and one which as reported previously has led to such strange financial abominations as <a href="">negative interest rate mortgages</a> - few noticed an even more important announcement by the Denmarks Nationalbank<strong>. On Friday the Danish central bank <a href="">said it would halt all government bond issuance "</a>until further notice"!</strong></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>Suspension of government bond issuance </strong></p> <p>&nbsp;</p> <p>Upon the recommendation of Danmarks Nationalbank, the Ministry of Finance <strong>has decided to suspend the issuance of domestic and foreign bonds until further notice. </strong></p> <p>&nbsp;</p> <p>The large surplus on the government finances in 2014 implies that the sale of government bonds has been greater than the funding requirement. <strong>Given the foreign currency situation, it is no longer appropriate to reduce the issuance of government bonds over several years</strong>. The balance on the central government's account at Danmarks Nationalbank is more than sufficient to cover the financing requirement in 2015. </p> <p>&nbsp;</p> <p>Danmarks Nationalbank has purchased foreign exchange in the market and reduced the monetary-policy interest rates. This has resulted in a widening of the negative spread between money market rates in Denmark and the euro area. The interest rate spreads for government bonds, however, have remained positive in the longer maturity segments. </p> <p>&nbsp;</p> <p>Danmarks Nationalbank expects that stopping the issuance of government bonds will contribute to reducing the interest-rate spreads in the longer maturity segments and thereby limit the inflow of foreign exchange.</p> </blockquote> <p>What Denmark just did, in addition to going further into NIRP, is to try and halt the appreciation of its currency by preventing more inflows not only on the short end but across the Treasury curve, and by halting supply of government bonds - the government had been due to issue 75 billion Danish crowns ($11 billion) worth of domestic debt to cover its 2015 financing needs - it hopes to not only lower long-end rates further, but to further weaken the Danish Krone, whose recent strength as a result of offshore inflows is the chief reason why many are increasingly saying the DEK peg to the EUR is in jeopardy.</p> <p>And stated even simpler, paraphrasing Jan Storup Nielsen of Nordea, what Denmark has done is "<strong>back-door QE"</strong>, because as some forget, there are two ways to push the price of an asset higher (thus pushing its yield lower in the case of a bond): increase <strong>demand, which is what conventional QE does when central banks buy bonds, or reduce supply. Which is what Denmark just did by completely cutting off all Treasury issuance "until further notice</strong>". </p> <p>"We had not expected this," said Jes Asmussen, Chief Economist at Handelsbanken. "Everything that happens now is surprising. We had expected the central bank to start to use other instruments if the pressure on the crown continued, but we did not consider it would be this exactly."</p> <p>But why, when with every passing day it is becoming clearer that the facade of central bank omnipotence is falling away, and central banks will, out of sheer desperation, do anything to delay the moments which as at least the SNB has admitted, is now inevitable? </p> <p>Some more <a href="">from Reuters</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>While unexpected and unconventional, the Danish move underscores a commitment to its decades-long fixed currency policy and is aimed at weakening the crown to keep it within a tight range to the euro. </p> <p>&nbsp;</p> <p>Pressure had been building on the crown since the Swiss National Bank abandoned its cap on Jan. 15, letting the franc surge against the euro, and the European Central Bank adopted a bond-buying scheme that helped weaken the euro more broadly. </p> <p>&nbsp;</p> <p>"They have been successful with pushing the short rates down but not the longer rates and that has been the catalyst for continued inflow into the Danish asset market," Kamal Sharma, G10 FX Strategy Director at Bank of America Merrill Lynch, told Reuters. </p> <p>&nbsp;</p> <p>"They are obviously looking at the full extent of the policy tool kit."</p> </blockquote> <p>They sure are, and the central bank "now hopes that removing the option of buying new Danish government bonds will reduce demand for the crown while pushing investors towards existing longer-dated bonds, which would lower borrowing costs more broadly."</p> <p>That's great, there is only one problem: what was until recently a "central bank put" has now become a "global speculator call" option. Why? Because the as the SNB just showed, there are very specific and defined limits to what banks with <em><strong>non-reserve currencies </strong></em>can do to defend their monetary policy.&nbsp; As a result, the Danmarks Nationalbank can thank its Swiss peers for not only crushing any hopes it may have of defending its currency peg, but essentially assuring that it will suffer massive losses on any and all strategies it implements to avoid a fate similar to that of the Swiss. </p> <p>Which means one thing: in the aftermath of the EURCHF devastation, where virtually unilimited stops were triggered under 1.20 sending the pair some 30% lower in milliseconds as HFTs and other traders were carried out feet first, increasingly more speculators are betting that the "<em><strong>Trade of 2015</strong>"</em> could be doing precisely the <strong>opposite </strong>of what the Danish central bank is hoping will happen: i.e., <em>shorting </em>the EURDKK (or going long the DKKEUR) in hopes that when the Danish peg finally does break, it too will result in long Swiss France-type profits.</p> <p>&nbsp;</p> <p><a href=""><img src="" width="600" height="314" /></a></p> <p>Of course, those who bet against the Danish Central Bank also get the benefit of being hedged against further European risk implosion, because should the Greek situation deteriorate even more resulting in inflows into safe-haven currencies such as the CHF <em><strong>and</strong></em> DKK (now that Draghi will do everything in his power to crush the Euro), then the cost of defending the Danish peg will become insurmountable and Denmark will, like Switzerland, have no choice but to give all those who are now on the other side of the trade the profit that will make many speculators' year in the blink of an eye.</p> <p>They say "don't fight the Fed", and in this case - at least until Janet Yellen capitulates on the Fed's stubborn insistence of pushing the USD every higher - this means <em>explicitly </em>to keep fighting the Danish Central Bank until its peg finally breaks. </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="1000" height="758" alt="" src="" /> </div> </div> </div> Bank of America Bank of America Bond Borrowing Costs Central Banks Currency Peg European Central Bank fixed Janet Yellen Merrill Merrill Lynch Monetary Policy Nielsen Reuters Swiss National Bank Switzerland Sun, 01 Feb 2015 19:25:48 +0000 Tyler Durden 501272 at Obama "Engages In Envy Economics": Proposes Offshore Profit Tax To Fund Public Spending <p>Just as <a href="">AAPL stock hits record highs and single-handedly rescues Q4 earnings from the doldrums</a>, it appears President Obama is bringing his own brand of 'middle-class-economics' Robin-Hood-iness to crush the 'wealth generating' machine that has served America's 1% so well for so long. As AP reports, <strong>The White House plans a six-year half a trillion dollar public works program <span style="text-decoration: underline;">financed with a one-time mandatory tax on profits that U.S. companies have amassed overseas</span></strong>. Under current law, profits only face federal taxes if they are returned, or repatriated, to the US; but Obama's new deal would set a <strong>tax on accumulated foreign profits at 14% and due immediately</strong> as part of a broader administration plan to overhaul corporate taxes. Of course, with Republicans 'in charge', it is unlikely to pass as Paul Ryan blasted,<strong> "the president is trying exploit envy economics again," adding, "top-down redistribution doesn't work."</strong></p> <p>&nbsp;</p> <p><a href=""><em>As AP reports,</em></a></p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>President Barack Obama's budget will propose an ambitious six-year, $478 billion public works program of highway, bridge and transit upgrades, half of it financed with a one-time mandatory tax on profits that U.S. companies have amassed overseas</strong>, White House officials said.</p> <p>&nbsp;</p> <p>The proposal, one of the<strong> main components of the $4 trillion spending plan for the 2016 budget year that Obama will send to Congress on Monday</strong>, attempts to tap into bipartisan support for spending on badly needed infrastructure repairs and construction.</p> <p>&nbsp;</p> <p><strong>The tax on accumulated foreign profits would be set at 14 percent and due immediately. </strong>Under current law, those profits only face federal taxes if they are returned, or repatriated, to the U.S. where they face a top rate of 35 percent. Many companies avoid U.S. taxes on those earnings by simply leaving them overseas.</p> <p>&nbsp;</p> <p><strong>The foreign earnings tax would be part of a broader administration plan to overhaul corporate taxes</strong> by ending certain tax breaks and lowering rates, a challenging task that Obama and Republican congressional leaders insist they are poised to tackle this year.</p> <p>&nbsp;</p> <p>Under Obama's plan, the top corporate tax rate for company profits earned in the U.S. would drop to 28 percent. <strong>While past foreign profits would be taxed immediately at the 14 percent rate, going forward new foreign profits would be taxed immediately at 19 percent, with companies getting a credit for foreign taxes paid.</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>"What I think the president is trying to do here is to, again, exploit envy economics,"</strong> Republican Rep. Paul Ryan of Wisconsin, the new chairman of the tax writing Ways and Means Committee. <strong>"This top-down redistribution doesn't work."</strong></p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p>This time, the budget will call for the one-time 14 percent mandatory tax on the up to $2 trillion in estimated U.S. corporate earnings that have accumulated overseas. That would generate about $238 billion, by White House calculations. <span style="text-decoration: underline;"><strong>The remaining $240 billion would come from the federal Highway Trust Fund, which is financed with a gasoline tax.</strong></span></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p>So tax foreign cash and tax cheap gas... </p> <p>In summary:</p> <p><a href=""><img src="" width="600" height="387" /></a></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p>Perhaps most ironically - CNBC will now know what the "money on the sidelines" is waiting for... to pay taxes!!</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="974" height="628" alt="" src="" /> </div> </div> </div> Money On The Sidelines President Obama White House Sun, 01 Feb 2015 19:00:12 +0000 Tyler Durden 501269 at