It has certainly been much calmer in October so far, especially compared with the deep deviations following the FOMC’s lack of activity. Stocks have rallied since October 1 along with many commodities, especially crude. Currencies have been almost mellow, with the ruble following oil prices upward, the real departing (for now) from its devastation and even those like the Indian rupee trading at its highest price since the PBOC broke. Is this a genuine reversal forming, perhaps as much as even minimal flirtation with general optimism?
It has certainly been described that way in the mainstream, as the relentless “unexpected” contraction has, so they say, given up to dancing dreams of central bank rescues yet again. Or has it?
That may be the case, and stocks, in particular, are counting on renewed “stimulus” to perhaps figure out what all prior and vast monetarism never could. However, eurodollars continue to press at a strained elevation, though not more so than before this week. The junk bubble has been sold heavily, with rates, prices and indices stretching even further back to the worst days of 2011 – though, it should be pointed out, some buying did appear yesterday and perhaps today (though updates on the institutional side aren’t available yet). Continue reading
Submitted by William Bonner, Chairman – Bonner & Partners
A Visit to the Temples
SYRACUSE, Sicily – “When in doubt, go to Italy” is the saying. We are always in doubt. What better place to go? Today, a warning about why a global recession is now likely.
But first, an update on Sicily… where we’ve spent the last few days exploring. Sicily is not exactly Italy. It sits in the middle of the Mediterranean, where every sleepy sailor or ambitious empire builder was bound to wash up.
The Phoenicians, Greeks, Carthaginians, Romans, Byzantines, Arabs, Normans, Spanish, and French – all tried their hands at ruling Sicily. The Italians are only the most recent of the invaders.
A look at the Valley of the Temples at Agrigento from afar. Altogether 45 antique ruins are assembled there.
Photo via deepinsicily.com Continue reading
It Can’t Get Any Worse?
On Friday, shortly after the release of the payrolls report, we asked half in jest whether the time had finally come for the market to interpret bad news as bad news, and not as an opportunity to speculate on more central bank largesse. As someone remarked to us later: “You had to ask”.
Photo credit: Paul Cross
Apparently a slightly later released news item informing us that “factory orders hit the skids” was taken as a buy signal of the “it can’t get any worse” sort. Normally it is considered bullish when the market rises on ostensibly bad news – and very often, this is actually the correct interpretation of such market action. However, one must be careful when the fundamental backdrop is subject to severe deterioration. Readers may recall that commentary on the markets was brimming over with the same type of argument in late 2007 and early 2008. In October 2007, the market in its unending wisdom priced the shares of Fannie Mae at $73 for instance.
SPX, 10 minute chart – after initially sliding on Friday, the market quickly recovered and has rallied quite a bit since then – click to enlarge.
The point is this: Although as a trader one must always respect market action, especially in the short term, one must at the same time avoid to ascribe to the mass of market participants a degree of wisdom they simply don’t possess. The market very often “knows” nothing and frequently tends to get things completely wrong. If that were not so, there would never be any buying or selling opportunities, but plenty of those obviously exist. Continue reading
The US and world economies are drifting inexorably into the next recession owing to the deflationary collapse of commodities, capital spending and world trade. These are the inevitable “morning after” consequence of the 20-year global credit binge which has now reached its apogee.
The apparent global boom during that period was actually a central bank driven excursion into the false economics of household borrowing to inflate consumption in the DM economies; and frenzied, uneconomic investing to inflate GDP in China and the EM.
The common denominator was falsification of financial prices. By destroying honest price discovery in the financial markets, the convoy of money-printing central banks led by the Fed elicited a huge excess of financialization relative to economic output.
The central manifestation of that was $185 trillion of debt growth during the past two decades——a stupendous explosion of credit which amounted to 3.7X the expansion of GDP.
And even that ratio is an understatement. That’s because measured GDP has been artificially bloated by the monumental worldwide malinvestment and excess capacity arising from the credit bubble. That is, phony “growth” which under the laws of economics will be liquidated in due course. Continue reading
The Census Bureau updated US trade activity for August, with export activity dropping almost 11% year-over-year. The global economy is clearly falling apart, no matter how much economists wish to see the dollar (exchange rate fluctuations) where the “dollar” (wholesale finance pulling back leading to economic disarray) already is. Export activity is only a little short of the trough of the dot-com recession, having already significantly surpassed the entire first phase of the Great Recession and the worst of the Asian flu.
The state of global recession being rather well-known, it is thus the import side that is of the more relevant confession. As noted not long ago, the insinuation that the dollar would mean only overseas economic problems is disproven by the continued contraction in imports. The figures aren’t as immense as exports (yet), but the continuous decline in import activity more than suggests a conspicuous lack (to the point of contraction) of US “demand.” Outside of a barely positive reading in March (at the regular quarter end “bump”), US imports have declined in every other month this entire year. While July-August was slightly better in comparison to April-May, that, again, suggests the lagging US response to the “dollar” waves. Continue reading
Submitted by Mark O’Byrne – GoldCore
by David Bryan
The future direction of the planet is a choice between independent money and the central bankers counter-party paper Ponzi. Gold is independent monetary wealth with incredible wealth value that cannot go broke and over time will progress in value.
Independent monetary wealth is when the money we use has proven wealth value with no counter-party liability. Independence is freedom from the influence of others, when we make a choice that we will not acquiesce to be counter-party to the fraud of central bankers and governments.
Gold is independent monetary wealth.
Gold is mined from ore and has incredible value as refined natural physical wealth;
Gold does not have a national currency and has wealth value beyond national boundaries. It has monetary wealth for people everywhere in the world;
Gold is the mortal enemy of central bankers. It is an independent monetary asset that would prevent central bankers from using their Ponzi counter-party paper to exclusively manage, control and centrally plan the economy;
Gold cannot be printed into existence. It does not have or need the artificial risks from using the central banker’s Ponzi of counterparty liability finance; Continue reading