There is a reasonably quiet start to the week before we head into the highlights of the week including the start of US reporting season tomorrow, FOMC minutes on Wednesday and IMF meetings in Washington on Friday. On the schedule for today central bank officials from the ECB including Mersch, Weidmann and Constancio will be speaking. The Fed’s Bullard speaks today, and no doubt there will be interest in his comments from last week suggesting that the Fed will hike rates in early 2015.
With all eyes focused on Eastern Europe, tensions appear to be quickly mounting between the erstwhile allies North Korea and China.
Just as we should be re-assured by Shinzo Abe's declaration that the Olympics will be 'safe' in Japan (despite his incessant calls for recovery in the Japanese economy when it is actually collapsing under its own devalued currency import costs); the UN is out with a report that states it did not expect “significant changes” in future cancer rates that could be attributed to radiation exposure from the reactor meltdowns. The levels, according to their report, were much lower than Chernobyl and therefore the Fukushima nuclear disaster is unlikely to lead to a rise in people developing cancer. But... some children 'might' have received doses that could affect their risk of developing cancer later in life...
Dispassionate big picture overview.
Market consensus is that deflation remains the greatest threat to the global economy. But that's ignoring signs of impending inflation, particularly in the US.
A few weeks ago, when the US announced the first set of sanctions against Russia, we jokingly commented that among the possible retaliations would be a Russian explusion of that global US permastaple, McDonalds. As it turns out, yet another "joke" may be on its way to becoming the truth.
The world’s official economic institutions are run by people who believe in monetary fairy tales. The 70 words of wisdom below from IMF head Christine Lagarde are par for the course. She asserts that a new jabberwocky expression called “low-flation” is the main obstacle to higher economic growth in Europe and the DM areas generally and that it can be cured by more central bank money printing.
The reasons to hold gold (and silver), and we mean physical bullion, are pretty straightforward. So let’s begin with the primary ones:
- To protect against monetary recklessness
- As insulation against fiscal foolishness
- As insurance against the possibility of a major calamity in the banking/financial system
- For the embedded 'option value' that will pay out handsomely if gold is re-monetized
The punch line is this: Gold (and silver) is not in bubble territory, and its largest gains remain yet to be realized; especially if current monetary, fiscal, and fundamental supply-and-demand trends remain in play.
The most common pushback from any China bull, industrial commodity bull, US equity market bull, or in fact any risk market in general "bull" is "won't the authorities just pull the trigger? Won't they just stimulate?" As UBS Commodities group notes, the debate is most advanced for China and for industrial commodities, where the weakness in the economy, and the sharp commodity price falls of recent weeks, has consensus looking for a stimulus driven bounce. UBS does not think so - the authorities in China and the US have become increasingly focused on structural issues - which, simply put, means they are less willing to act than before. It appears last night's mini (railway-focused) stimulus supports the expectations of no "bazooka".
Japanese stocks have been bouncing back higher in the last few days as considerably worse data than expected combined with the looming consumption tax hike (which the government has to do to show the market that is, at a minimum, somewhat fiscally responsible) are driving both stocks and JPY to discount a near future dominated by an even bigger stimulus by the BoJ. However, casting a big shadow over all this is what happened the last time Japan raised its consumption tax...
Courtesy of Abenomics, all Japan managed to do is import the bad "non-core" inflation, which has sent food and energy prices through the rood (confused why the rest of the world is suffering from an episode of acute deflation? look no further than deflation-exporting Japan) and made "non-core" purchases like food and gas increasingly more unaffodrable to the ordinary Japanese consumer. Today it just went from bad to worse, because as Nikkei reports, gasoline prices at the pump surged to a 5-year high in Japan this week, due to tax increases. The Oil Information Center says the average retail price was 164.1 yen, or about 1.6 dollars, per liter, as of April 1st. That's an increase of about 4.9 cents from the previous week.
China General Says "War With Japan Increasingly Likely" As Russia Conducts New Army Drill Near Latvia, EstoniaSubmitted by Tyler Durden on 04/03/2014 17:02 -0400
Just in case escalating tensions along Russia's western border - and one can be certain Estonia and Latvia will scream bloody murder any second - here is a retired Chinese general who just told SCMP that a "war with Japan over territorial disputes is becoming increasingly likely" and that China is more than capable of defending itself.
The Nikkei shot up last night because the Yen was weak and, best of all, Japan's $1.25Tn pension fund will be handing money to the Banksters to put into the stock market.