Far Beyond Oil; Wholesale Imbalance Extends to Extremes In Autos

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

What is taking place on the wholesale level of the supply chain is simply unprecedented. Admittedly, the current iteration of the wholesale data series only dates back to 1992, so there is some possibility of a similar disparity at some point in actual economic history. However, at present, inventory continues onward with only a slight deviation and slowing recently while sales contract further and further. Year-over-year, wholesale sales declined 5% in August, marking the second worst monthly drop of the recovery behind only May. Worse, the outlines of the “dollar” waves are clearly visible and not just in the non-adjusted annual rates of change; even the seasonally-adjusted figures show the big contraction of early 2015, the slight rebound in the middle and now a renewal.

ABOOK Oct 2015 Wholesale Sales Inv NSAABOOK Oct 2015 Wholesale Sales SA MM

The second consecutive monthly decline in the seasonally-adjusted figures makes now ten out of the past thirteen months. Immediately, analysis will wander to petroleum given the close correlation between “dollar” and oil prices, but wholesale conditions, both sales and inventory, away from crude presume similar and broader strain. That suggests that while petroleum acts as an amplification of the downturn it is not the only expression of it. Continue reading

A Simple Recipe for Living Better for Less (Not for Everyone) …

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Chockablock with History

ON THE WINE DARK IONIAN SEA – We drove from Palermo to Agrigento, thence to Syracuse and finally Catania. This was a quick visit to Sicily, not enough to learn very much.

Sicily is complex. It deserves time. If we had more, we would rent an apartment and get to know it better. But now we are on a ship, headed to the Greek island of Santorini.


mediterranean 2Mediterranean views…

Photo credit: fmh

We’re back-tracking the route perhaps used 2,800 years ago by the Greek settlers who colonized Sicily in the eighth century B.C. They set up shop at Syracuse and spread all over the island. A few decades later, they were fighting for their lives against the Carthaginians

Then, in 264 B.C., it was the Romans who aimed to take over. It was the nearly 50-year-long battle against the Romans that displayed the full range of the classical era’s greatest genius – Archimedes.

Roman_conquest_of_ItalyWhen Rome conquered Italy – shortly after sending Phyrrus of Epirus (yes, that Phyrrus) packing, the Romans started their first war with Carthage, which at the time controlled most of Sicily, but had been weakened considerably by Phyrrus’ Sicilian excursion (Phyrrus wanted everything, and got nothing in the end). Rome finally managed to grab Sicily in the 2nd Punic war in 218 BC – click to enlarge. Continue reading

The Impulsiveness of US Power

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

Washington’s impulsive use of power is a danger to America and to the world. Arrogant Washington politicians and crazed neoconservatives are screaming that the US must shoot down Russian aircraft that are operating against the US-supplied forces that have brought death and destruction to Syria, unleashing millions of refugees on Europe, in Washington’s effort to overthrow the Syrian government.

Even my former CSIS colleague, Zbigniew Brzezinski, normally a sensible if sometimes misguided person, has written in the Financial Times that Washington should deliver an ultimatum to Russia to “cease and desist from military actions that directly affect American assets.” By “American assets,” Brzezinski means the jihadist forces that Washington has sicced on Syria.http://www.informationclearinghouse.info/article43059.htm

Brzezinski’s claim that “Russia must work with, not against, the US in Syria” is false. The fact of the matter is that “the US must work with, not against Russia in Syria,” as Russia controls the situation, is in accordance with international law, and is doing the right thing.

Ash Carter, the US Secretary for War, repeats Brzezinski’s demand. He declared that Washington is not prepared to cooperate with Russia’s “tragically flawed” and “mistaken strategy” that frustrates Washington’s illegal attempt to overthrow the Syrian government with military violence.http://www.theguardian.com/world/video/2015/oct/07/ash-carter-russia-us-syria-airstrikes-video

Washington’s position is that only Washington decides and that Washington intends to unleash yet more chaos on the world in the hope that it reaches Russia.

I guess no one in hubristic and arrogant Washington was listening when Putin said in his
UN speech on September 28: “We can no longer tolerate the state of affairs in the world.” Continue reading

Who’s Profited Most from 7 Years of Fed Policy…. Well the Fed of Course!

Submitted by Thad Beversdorf  –  The First Rebuttal Blog

So I’m often asked whether I really believe that government and policymakers intentionally create laws and policies that hurt the people and help themselves.  My answer is typically that “if you’re asking me this question you know I do but you don’t believe me; so either do your own research or continue to live in the world as you wish to perceive it.  I’m not here to beg you to open your fucking eyes”.

I started this blog about 18 months ago and I have chosen to provide my research with no income attached to it.  It means I have no axe but the truth.  I spent 13 years in major international banks and have been on both sides of the double edged sword that makes the financial services sector a place to reap riches and also to be thrown to the wolves.  That is, I am intimately familiar with the system.  That said, what I’ve discovered is that really very little effort is required to see the world for what it is.

The closest analogy is probably best left to Orwell with Animal Farm.  Humans around the world have been molded to believe they are part of a system to enable them to get ahead.  While some do manage to find a path that has substantial monetary rewards the vast majority (and growing) have, whether they realise it or not, succumb to a role of Boxer, the cart-horse.

That is, our lives revolve around putting in 8 to 10 hours of labour each day for which we receive enough to feed ourselves and our families, have a warm place to sleep and some of us are able to obtain some credit from which we can enjoy things like new cars every few years (while rarely actually owning them).  However, in terms of reaping rewards we sew, it is simply not reality.  The current system has a clear economic hierarchy which began taking shape centuries ago in Europe.  The problem which seems to exist is that people are willing to look at a calendar, see that it’s Thursday but believe almost any (false) figure of authority who says it’s Wednesday.  Let me give you an example. Continue reading

The Lowest Interest Rates in 5,000 Years…

Submitted by William Bonner, Chairman – Bonner & Partners

A Dangerous Spot

SANTORINI, Greece – “Gods were gods. Men were men,” explained our tour guide, Spiros.

“The ancient Greeks thought there was a difference. Men had to realize they weren’t gods. They couldn’t do the things gods could do. If they tried, it provoked a disaster. The gods got jealous and punished them.”

What has changed? There are still things humans can and can’t do. When men get too big for their britches, the gods still punish them. The disaster we were looking at had nothing to do with the hubris of mankind. The problem was geological.

santoriniSantorini – world improvers from Hollywood have apparently found housing there.

Photo via kiklamino.com

Having built their city over the fault line between the African and European tectonic plates, the ancient Cycladians were in a dangerous spot. Every few thousand years there were bound to be fireworks. As it turned out, trouble came – big time – in about 1650 B.C. The earth trembled. A huge volcano rose from the sea near Akrotiri and blew up. Continue reading

Deutsche’s 2014 Desperation May Reveal A Great Deal About the Current ‘Dollar’ Situation

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

With China prepared to open again after a week long holiday absence, the breaking news from Deutsche Bank signaling a huge loss expectation for Q3 is not good timing. As noted previously, China’s various wholesale “dollar” fill, in the end, is truly dependent on a good and robust “dollar” environment appearing sometime soon. Deutsche was one of the last global holdouts in terms of maintaining a huge presence in balance sheet sectors that patrol and maintain the various dimensions of eurodollar operations. Not anymore.

The bank has been under considerable pressure for years, as suddenly after the taper summer of 2013 the bank, like its eurodollar peers, lost its prior profitability boost. That was a huge problem because the bank had been inordinately dependent upon internal profitability to restore some semblance of leverage discipline. Instead, everything turned upside down whereby leverage remained high only without anything close to sufficient returns to justify it. Again, this was a similar situation to other eurodollar banks but to an added degree (think Deutsche’s enormous derivatives book, dark leverage, in its CB&S division).

What Deutsche did to restore balance in the wake of 2013’s changed QE profit circumstances was almost unique (Credit Suisse would try something similar). The bank loaded additional capital early last year, under circumstances that remain somewhat unclear, and then plowed ahead into as much risk as it could possibly source. In its press publications displaying those forward intentions in May 2014, the bank (this is somewhat unbelievable in hindsight, far more so than it was then) openly discussed how it expected to drive returns while maintaining leverage from new ventures into US junk and leveraged loans as well as emerging market debt. Given that the price inflection seems to have occurred as the “dollar” turned only a month or so later, Deutsche seems to have placed all its chips right at the top.

Only those banks TBTF can play here. As DB makes plain, there are only “5-6 FIC players left” and there exist exceptional barriers to entry ensuring smaller banks stay smaller. This oligarchical structure is perfect for DB in “attractive products”, such as high yield and leveraged lending (both can fairly be termed the modern incarnation of junk).
To sum up the weekend [May 19, 2014]: DB acknowledges last year’s taper selloff permanently altered its business and capital plans. The bank will shift its focus for primary profits to US junk because that is where the bubble is currently taking place, a frenzy fit for only those TBTF.

Continue reading

Legal Fictions and new Battlegrounds in the War on Cash

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Greece – Ground Zero in the War on Cash?

We believe it was our friend Claudio Grass of Global Gold in Switzerland who first mentioned that the eurocracy may possibly have plans to use the Greek crisis as an opportunity to expand the ongoing war on cash. It stands to reason: Greece is well known for its extremely large “shadow economy” (the name for economic activity that flies under the radar of the greedy grasp of the State). Greece’s citizens not unreasonably regard the State as akin to a mafia organization which they are trying to avoid as much as possible (unless it promises them free goodies to buy their votes – they do of course gladly accept those).

We vividly recall an interview with a Greek shipping magnate about the constitutional provision that has relieved the country’s shipping industry from income tax. The interviewer asked (we are paraphrasing) whether the magnate thought it “fair” that this was so, and if he wasn’t troubled by his conscience in light of the Greek government debt crisis. The shipping magnate replied (again paraphrasing) along the lines of: “Just look at the government in Athens. They’re nothing but a bunch of crooks. Would you hand over your money voluntarily to Al Capone? Surely not. Well, neither do I.”

al caponeNot someone you want to hand your money to…

Photo credit: Bettmann / Corbis

A great many ordinary Greeks undoubtedly agree with the shipping magnate. They have a very cynical, but ultimately quite well-informed view of the political class and the State. The reason why the Greeks are way ahead of most other European citizens in this department is rooted in history. Greece had been under Ottoman occupation from the 15th century until 1821. The so-called millet system led to the Orthodox Christian Greek community remaining a fairly cohesive group. However, the Greeks certainly chafed under Ottoman rule. Continue reading

Global Recession Coming – Even “Powerhouse” Germany and UK Slow “Dramatically”

Submitted by Mark O’Byrne  –  GoldCore

– IMF warn of “fresh financial crisis”
– German exports fall 5.2%, largest slump since recession of 2009
– German imports also fall 3.1%
– Many sectors across German economy see unexpected declines in factory orders and industrial production
– UK Chief Financial Officers (CFOs) report sharp rise in uncertainty
– UK PMI has fallen to lowest level since April 2013
– Hope for the best but be prepared for less benign scenarios

GoldCore: IMF World Debt Map by Country

IMF 2015 Global National Debt Map – IMF

The IMF have been growing more vocal in recent weeks about the possibility of another financial crisis and severe recession. The head of financial stability at the IMF, José Viñals has said that this outlook “does not rely on extreme assumptions at all”.

IMF head, Christine Lagarde has said that the slow down now being seen in China and other large emerging markets will cut economic growth globally back to levels last seen during the crisis of 2009.

Viñals added “If we don’t get it right we could set the clock back in terms of growth.”

In its financial stability report the IMF said:

“Shocks may originate in advanced or emerging markets and, combined with unaddressed system vulnerabilities, could lead to a global asset market disruption and a sudden drying up of market liquidity in many asset classes.”

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

September Liquidity Crisis Forced Fed Into Massive Reverse Repo Operation (IRD)
Bank Of England Warns Financial Institutions Over Commodities Exposure (Guardian)
If You Thought China’s Equity Bubble Was Scary, Check Out Bonds (Bloomberg)
CEO: Deutsche Isn’t Worth What It Once Was And Can’t Pay What It Used To (BBG)
Day After Deutsche Says Not All’s Well, Credit Suisse Also Admits Trouble (ZH)
Bruised Germany Is Canary in Coal Mine for Europe Economic Woes (Bloomberg)
Saudi Arabia Orders Deep Spending Curbs Amid Oil Price Slump (Bloomberg)
Former IMF Chief Economist Blanchard Backs ‘People’s QE’ (Reuters)
Hong Kong High Street Shop Rents Fall Up To 43% From Their Peaks (SCMP)
Bill Gross Sues Pimco For At Least $200 Million (NY Times)
Ponzi Suspect’s 17 Accounts Raise Questions Over Bank Safeguards (Bloomberg)
Why This Feels Like A Depression For Most People (Jim Quinn)
VW Exec Blames ‘A Couple Of’ Rogue Engineers For Emissions Scandal (LA Times)
VW Facilities, Worker Homes Raided in Diesel Investigation (Bloomberg)
US House Slams Regulators For Not Catching VW For Years (Reuters)
Four More Carmakers Join ‘Dieselgate’ Emissions Row (Guardian)
Merkel Slams Eastern Europeans On Migration (Politico)
542 People Rescued In 24 Hours Off Greece (AP)
Baby Dies After Migrant Boat Breaks Down Off Greek Island Lesbos (Reuters)

Read much more here: Debt Rattle October 9 2015 – TheAutomaticEarth.com