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nuggets of financial self-defence
Financial blog on news and global macroeconomic themes regarding the world economy. The blog's primary focus pertains to inflation, deflation, and hyperinflation, especially currencies, gold, silver, crude, oil, energy and precious metals. Other macro discussion topics include interest rates, China, commodities, the US dollar, Euro, Yuan, Yen, stagflation, emerging markets, politics, Congressional and statewide policy decisions that affect the US and global markets.
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Companies' Stock Buybacks at Biggest Pace Since 2007; Companies Rewarding Investors?

śr., 17/09/2014 - 20:05
In yet another sign of market over-exuberance, the Wall Street Journal reports Share Repurchases Are at Fastest Clip Since Financial Crisis.
Corporations bought back $338.3 billion of stock in the first half of the year, the most for any six-month period since 2007, according to research firm Birinyi Associates. Through August, 740 firms have authorized repurchase programs, the most since 2008.

The growth in buybacks comes as overall stock-market volume has slumped, helping magnify the impact of repurchases. In mid-August, about 25% of nonelectronic trades executed at Goldman Sachs Group Inc., excluding the small, automated, rapid-fire trades that have come to dominate the market, involved companies buying back shares. That is more than twice the long-run trend, according to a person familiar with the matter.Large Repurchases in 2014



Rewarding Investors - Not



Contrary to the above graphic (and common wisdom), companies do not reward investors by buying back shares at inflated prices. Companies bought back the most shares in 2007, right before the crash, and the least shares at the most opportune time in 2009.

In practice, insiders buy low and sell high, and pocket cash from options all the way up. Insider activity is exactly the opposite of how companies treat shareholders.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Venture Capital Risk Taking and Cash Burn Rates Unprecedented Since 1999; 47% of Nasdaq in Bear Market

śr., 17/09/2014 - 06:50
Venture capital risktaking and burn rates on cash are at levels that exceed the technology bubble in 1999. Companies that haven't made a dime, and perhaps never will, have valuations of $10 billion more.

Curiously, it' venture capitalist Bill Gurley who Sounds Alarm on Startup Investing in an interview with the Wall Street Journal.
WSJ: Mr. Gurley, who often voices his opinions on his blog, Above the Crowd, sat down with The Wall Street Journal as part of a Journal event series called "Tech Under the Hood." The investor in Uber, Zillow, OpenTable and other Web startups spoke on a wide range of topics. What follows is an edited excerpt of a conversation specifically about potential cracks in the tech-startup investing scene.

Mr. Gurley: Every incremental day that goes past I have this feeling a little bit more. I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now. Unprecedented since ‘'99. In some ways less silly than '99 and in other ways more silly than in '99. I love the Buffett quote ["Be fearful when others are greedy and greedy when others are fearful"]  because it lays it out.

And I guarantee you two things: One, the average burn rate at the average venture-backed company in Silicon Valley is at an all-time high since '99 and maybe in many industries higher than in '99. And two, more humans in Silicon Valley are working for money-losing companies than have been in 15 years, and that's a form of discounted risk.

In '01 or '09, you just wouldn't go take a job at a company that's burning $4 million a month. Today everyone does it without thinking.  Bubble Risk

The Guardian picks up on the story in Leading tech investors warn of bubble risk 'unprecedented since 1999'.
Two of the world’s leading tech investors have warned the new wave of tech companies and their backers are taking on risk and burning through cash at rates unseen since 1999 when the “dotcom bubble” burst.

Bill Gurley, partner at Silicon Valley-based investor Benchmark, sounded the horn of doom on Monday warning that “Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now.”

His comments were backed up Tuesday by Fred Wilson, the New York-based co-founder of Union Square Ventures who has backed companies including Twitter, Tumblr and Zynga.

Burn rates – the amount of money a startup is spending – are “sky high all over the US startup sector right now”, he wrote in a blog post [Burn Baby Burn].

“We have multiple portfolio companies burning multiple millions of dollars a month. Thankfully its not our entire portfolio. But it is more than I’d like and more than I’m personally comfortable with,” he wrote.

The comments come after a new generation of tech companies have attracted record levels of investments at levels that give the profitless businesses eye-watering valuations.

In August Snapchat, the social messaging service, was valued at $10bn after a new round of funding. The free service’s fans send 500m self-deleting messages a day, but Snapchat has yet to declare how it intends to make money. Among the other big tech valuations in recent months are Uber, the taxi app service, which was valued at $18bn after its last round of funding in June, and Airbnb, the short term rentals service, which was valued at $10bn in April.Record S&P 500 Masks 47% of Nasdaq Mired in Bear Market

Speculation is running rampant. But just as in 2000 when market breadth turned sour, and profitless companies died before the rest, Bloomberg reported yesterday 47% of Nasdaq Mired in Bear Market.
About 47 percent of stocks in the Nasdaq Composite (CCMP) Index are down at least 20 percent from their peak in the last 12 months while more than 40 percent have fallen that much in the Russell 2000 Index and the Bloomberg IPO Index. That contrasts with the Standard & Poor’s 500 Index (SPX), which has closed at new highs 33 times in 2014 and where less than 6 percent of companies are in bear markets, data compiled by Bloomberg show.

The divergence shows the appetite for risk is narrowing as the Federal Reserve reins in economic stimulus after a five-year rally that added almost $16 trillion to equity values. It’s been three years since investors saw a 10 percent decline in the S&P 500 and they’re starting to avoid companies that will suffer the most when the market stumbles, said Skip Aylesworth, a portfolio manager for Hennessy Funds in Boston.Expect the rot to spread. It starts the same way every time.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

One Thing You Can Always Count On

śr., 17/09/2014 - 04:50
Congratulations (of sorts) go to French prime minister Manuel Valls for being able to count sheep properly.

Valls staged a vote of confidence in French parliament even though polls show 62% of voters would like president Francois Hollande to step down now.

In spite of what the public wants, Valls was certain of the outcome in advance.

Why? Because a vote of no confidence would have triggered new elections and leftist parties would have gotten clobbered.

Count on This

One thing that is always safe to count on is politicians won't vote themselves out of office.

Sure enough, Valls wins confidence vote and vows to press on with France reform.
France’s prime minister on Tuesday vowed to continue his reformist drive as he won a crucial confidence vote to strengthen his hand in efforts to restart the country’s faltering economy.

Manuel Valls said restoring competitiveness was “indispensable” for reigniting growth yet he stopped short of touching the 35-hour working week or other closely held symbols of his Socialist party’s left. Reform?

Well then - by all means let's have reform ... as long as it does not touch anything socialists want.

Did this strengthen Valls' hand? Hardly.

This staged maneuver will upset socialists who do not want any reform at all as well as conservatives who want real reforms.

The favorable rating for Hollande is 13%, a new record low. Barring some miraculous turn around in the French economy, expect support for Valls to plunge to new lows as well.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Counting Sheep: French Government Faces Second No Confidence Vote in Six Months

wt., 16/09/2014 - 19:53
Second No Confidence Vote in Six Months

In spite of the fact the Socialist party holds a majority of just 1 in the 577-seat lower house, French prime minister Manual Valls hopes to stabilize things with a Second No Confidence Vote in Six Months.
Mr Valls could see a narrowing of his majority compared with the vote when he was first appointed prime minister at the end of March after a big socialist loss in local elections. Then he won by a margin of 306 votes to 239 against, with 26 abstentions.

“Valls is politically and economically archaic. He is taking solutions from (Tony) Blair and (Gerhard) Schroeder that don’t work any more,” Pascal Cherki, a leftwinger who abstained in the previous confidence vote in April, told RMC radio.

But the government has support from within other leftwing parties. Mr Valls is also betting that socialist rebels would not want to cause the downfall of the government, as this would trigger legislative elections and almost certain defeat for the socialists.

A win for the government would also not erase uncertainty as it will be closely followed by the presentation of the 2015 budget to parliament next month, which economists are concerned could face a delay in approval amid political upheaval.

Opinion polls underscore the sense of leadership crisis in the eurozone’s second-largest economy. One last week showed 62 per cent of electors wanted Mr Hollande to step down before his term ends in 2017.Counting Sheep

Given that Valls needs support from other left-wing parties to survive, he would not voluntarily call for the vote unless he was pretty certain of the outcome. Surprises can happen, but I suspect Valls counted the sheep properly.

Can the vote really inspire confidence in the government as Valls hopes?

Of course not. The fact that 62% of the electorate hopes Hollande will step down as president is not very inspiring, and it's certainly nothing a vote of confidence can fix.

That such a stunt is even needed shows weakness.

Assuming the government survives the vote, the only reason will be fear of Marine Le Pen's Front National Party picking up more seats at socialist expense in a new election.

For more on Front National please see Marine Le Pen Ahead of Hollande in France Presidential Poll; Le Pen Blames EU for Crisis in Ukraine 

Looking Ahead to 2017

The next scheduled national election is in 2017. Will Hollande even survive that long? Perhaps not if socialists decide to take their lumps sooner rather than later.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Deflationary Spiral Nonsense; Keynesian Theory vs. Practice; Eurozone Policymakers Concerned About Falling Prices

wt., 16/09/2014 - 02:42
Price Deflation Hits Italy First Time in 55 Years

The Italian National Institute of Statistics (ISTAT) reports that consumer price inflation declined by 0.1% from August 2013 to August 2014.
Italian consumer prices fell 0.1 percent year-on-year in August of 2014, matching preliminary estimates. The country’s annual inflation rate touched the negative territory for the first time in nearly 55 years due to a drop in energy prices.

Year-on-year, prices of energy fell 3.6 percent in August, mainly driven by a 1.2 percent drop in cost of non-regulated energy products. Additional downward pressures came from food cost (-0.5 percent), mainly unprocessed food (-1.8 percent) and communication (-9.0 percent). Meanwhile, prices of services slowed (0.6 percent in August compared with a 0.7 percent increase in July).Italy CPI 2000 - 2014



Eurozone Policymakers Concerned About Falling Prices

A Financial Times headline portrays falling prices as a negative thing: Deflation Takes Shine Off Sales for Italy’s Shopkeepers.
The appearance of deflation in Italy suggests a worrying spread from Spain, another peripheral eurozone economy, where it reared its head this year. Deflation is now stalking the home of Rome-born Mario Draghi, the European Central Bank president, who has sounded the alarm about the need to restore growth across the continent and has taken aggressive and unorthodox measures to do so.

Matteo Renzi, the youthful prime minister who gained power in February with an agenda of radical economic and political reform, acknowledged last week that growth would in fact be “around zero” this year.


The hope is that lower prices will start luring Italians back to the shops. But policy makers – particularly Mr Draghi and other ECB officials – do not seem to be betting on the resurgence of the Italian consumer.

They have been more focused on – and fearful of – the worst case: that the country, along with the eurozone more generally, could fall into a deflationary spiral, in which consumers hold off purchases in the expectation that prices will fall even further. Deflation would also raise the real value of Italy’s monumental €2.1tn public debt load, causing angst among investors.

“Even if you think the probability of damaging deflation is low, if it were to happen it’s a disaster,” says Erik Nielsen, global chief economist at UniCredit, the Italian bank. “The ECB was right to take out an insurance policy against it,” he adds, referring to measures including interest rate cuts the central bank took this month.Deflationary Spiral Nonsense

The idea that falling prices are bad for the economy is ridiculous. Taking out insurance against falling prices is even more absurd.

Ask any consumer if he wants lower gas prices, lower food prices, lower hotel prices, lower computer prices, or lower prices on any consumer items and the answer will be yes.

Next, ask any consumer who needs a coat, computer, TV, or any other needed item if he would he wait a year to buy one because prices were falling.

Assuming the consumer had enough money to buy any needed item, he would buy that item now.

Thus, the entire deflationary spiral concept of consumers delaying purchases because prices are falling is ridiculous.

Keynesian Theory vs. Practice

Keynesian theory says consumers will delay purchases if prices are falling. In practice, all things being equal, it's precisely the opposite.

If consumers think prices are too high, they will wait for bargains. It happens every year at Christmas and all year long on discretionary items not in immediate need.

In general, people like bargains, and when bargains get big enough, people do not wait for even bigger bargains. Consider Christmas shopping. Most do not wait until after Christmas when bargains are even bigger than before Christmas. 

Yet, these ridiculous myths of consumers waiting because prices are falling as opposed to consumers waiting for prices they can afford have been repeated so many times that people actually believe them.

Delays For Other Reasons

People do delay purchases if they don't have a job, or the money, or they perceive prices are simply too high.

The problem is typically debt, not falling prices. If consumers have too much debt or too little income they cannot buy. If businesses have too much debt they cannot expand. If governments have too much debt, they eventually run into problems.

Assets vs. Consumer Goods

Asset prices are different. Consumers will buy houses, stocks, bonds, land, and other assets if they perceive central bank inflation will bail them out with ever-increasing asset price inflation.

Eventually prices get ridiculously stretched. Then when the greater fool stops buying, bubbles burst, asset prices fall, and then debt deflation takes over. Debts cannot be paid back, businesses cannot hire, and consumers out of a job cannot shop.

Keynesian Nonsense

Keynesian economists want government to pick up the slack when businesses fail. That's nonsense. Several decades of Keynesian and Monetarist attempts to jump start the Japanese economy with nothing to show for it but debt to the tune of 250% of GDP should be proof enough.

Falling prices are never the problem. Rather it's central-bank sponsored inflation that causes asset bubbles and promotes debt and malinvestment that is the problem.

The solution, that no central bank cares to promote, is to not sponsor assets bubbles in the first place. Once in asset bubbles, the best thing to do is let the bust play out.

Assuming Japan remains on its current path, the upcoming collapse in the Yen will provide the final proof that Keynesian economics is pure idiocy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Ukraine Offers Amnesty to Rebels, 3 Years of Limited Self-Rule; War and Peace Factions Split; More Killing is No Way to Honor Dead

pon., 15/09/2014 - 20:43
War and peace factions are at odds in Ukraine.

The war factions claim Putin cannot be trusted but the peace factions have finally had enough of war. The likely loss of Mariupol within weeks was simply too much to take.

One thing is certain, more killing will only make matters worse.

Ukraine Offers Amnesty to Rebels, 3 Years of Limited Self-Rule

RTE reports Eastern Ukraine Offered Three Years of Limited Self-Rule.
Ukraine's president has offered parts of the country's separatist east limited self-rule for three years under the terms of a peace plan reached with Russia.

Petro Poroshenko's official website said the pro-Western leader told top lawmakers the proposal would be part of a broader deal with pro-Russian rebels signed on 5 September.

He intended to formally submit it to parliament on Tuesday.

The bill also extends the right of people in the rebel-held Luhansk and Donetsk regions to use Russian in state institutions and conduct local elections on 9 November, according to media reports.

The bill further permits the regions to "strengthen good neighbourly relations" between local authorities and their counterparts in Russia.

It protects from criminal prosecution "participants of events in the Donetsk and Luhansk regions" - appearing to apply to both the insurgents and Ukrainian government troops - and allows regional councils to appoint local judges and prosecutors.

The bill also promises to help restore damaged infrastructure and to provide social an economic assistance to particularly hard-hit areas.

Mr Poroshenko had promised to offer parts of the war-torn industrial east broader autonomy under the terms of the truce agreed earlier this month with the Russian government and two separatist leaders.

He urged parliamentary faction leaders to quickly back his efforts to end five months of fighting that have killed more than 2,700 people and forced more than half a million from their homes.

Mr Poroshenko said his proposals guaranteed "the sovereignty, territorial integrity and independence of our state".

The presidential website said the three years of limited self-rule would give his government a chance to implement "deep-rooted decentralisation, which will be the subject of corresponding constitutional changes"."War" and "Peace" Factions Split Ukraine

The above details sound like a reasonable start of negotiations to me. However, the "war party" led by Ukraine's prime minister will have nothing to do with it.

Please consider "War" and "Peace" Factions Split Ukraine Politics
An agreement to secure a permanent end to fighting might avoid more casualties in a war that has cost 3,000 Ukrainian lives and has involved Russian troops directly since last month – but at the cost of Ukraine potentially losing control of the separatist-held regions of Donetsk and Lugansk.

The truce agreed earlier this month in Minsk has exposed faultlines among the Kiev leadership that emerged from the protests that toppled Viktor Yanukovich in February.

Since the ceasefire, two camps have materialised – a “party of peace” around President Petro Poroshenko, and the “party of war” associated with Arseniy Yatseniuk, prime minister, and Yulia Tymoshenko, the former premier.

The divisions may partly reflect competing ambitions ahead of the October 26 parliamentary poll, which is intended to sweep away remaining vestiges of the Yanukovich era.

The split became concrete last week after Mr Yatseniuk pulled out of talks to stand on the president’s party list in the elections. He unveiled his own “Popular Front” party, including commanders of some volunteer battalions in east Ukraine. These are composed partly of far-right activists who came to the fore when the winter protests turned violent.

“You’re giving land for peace, but a lot of people died,” says Mychailo Wynnyckyj, a sociology professor at Kyiv-Mohyla Academy. “[Mr Poroshenko] is going to have a constituency in the country that is against that kind of deal.”More Killing is No Way to Honor Dead

Anyone remember the ridiculous pro-war argument during the Vietnam War?

"It would be a dishonor to the dead to pull out now." So instead, thousands more soldiers died to "save honor" for the already dead.

Honoring the dead with more dead didn't work then, and it won't work now. That should be a lesson for the party of war, but it won't be.

Ceasefire Under Pressure 

The Financial Times reports Violence Puts Ukraine Ceasefire Under Pressure.
Fighting in eastern Ukraine continued on Monday in the worst violence between pro-Kiev forces and Russian-backed separatists since a fragile ceasefire was brokered on September 5.

Colonel Andriy Lysenko, an army spokesman, said shelling at the weekend near the airport in rebel-held Donetsk, which officials said claimed six lives and injured 15, was triggered by an attack by some 200 separatists. Government forces had repelled it and were “holding positions”, but fighting was continuing and there had been additional fatalities and injuries, he said.

Ukraine forces were observing the truce and fought back only when attacked, he said. But separatists contradicted the claim, accusing Ukrainian forces of shelling Donetsk and other areas dozens of times in the past 24 hours.Who to Believe?

There are likely war proponents in both the rebel and the Ukraine side.

However, it is 100% clear Ukraine's prime minister Arseniy Yatseniuk wants a war conclusion with total surrender of the rebels.

With Yatseniuk in control of the "Popular Front" volunteer "Far Right" activists, it's easy to see where the problem might be.

Without a doubt Obama, McCain, and NATO hope for more war. Ukraine in NATO is the goal.
I propose peace is a far better deal than WWIII.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

47% of Chinese Billionaires Want to Leave China Within 5 Years, Only 6% of US Billionaires Seek to Leave US

pon., 15/09/2014 - 07:36
A Barclays' survey of over 2,000 individuals with a net worth over $1.5 billion contains some pretty interesting results.

Those in China and Singapore are most likely to leave their country, while those in the US and India were most likely to stay.

Please consider Almost Half of Wealthy Chinese Want to Leave.
Nearly half of wealthy Chinese are planning to move to another country within the next five years, according to a new Barclays survey.

Singaporeans were the second-most eager to flee home, with 23% planning to relocate in five years, followed by 20% for the U.K. and 16% for Hong Kong. Indian and American rich are the least likely to move, with only 5% and 6% of respondents saying they would relocate.



The top reasons Chinese cite for moving abroad are better educational and employment opportunities for children (78%), economic security and desirable climate (73%), and better health care and social services (18%). Hong Kong is their top destination (30%), followed by Canada (23%).I am not surprised that a large percentage of extremely wealthy Chinese hope to relocate to another country within 5 years. However, I am surprised by the reasons given.

I would have expected air and water pollution to be one of the top reasons. Instead, education, employment opportunities, and economic security headed up the list.

For health reasons alone (air and water pollution), I could never live in China. Politics, freedom of expression, food, and the sheer number of people living in the country add to my list of reasons.

Curiously, China was the top choice of 30% of those who would leave Singapore.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Stiglitz vs. Krugman on Scotland; Polls Diverge; New Fearmongering Tactics in Waning Moments of Campaign

nie., 14/09/2014 - 19:12
New Fearmongering Tactics

In the waning moments UK prime Minister David Cameron warns Scots "Leave and You Go Forever".

Actually, the warning probably should be "Stay and you stay forever" because the UK will never allow such a vote again.

Regardless, no country should want to be under the thumb of another.

Polls Diverge

The vote for Scottish independence is now too close to call. In a Scottish Poll Roundup one new poll over the weekend shows the "Yes" vote with a substantial 54-46 lead, but most polls show the "No" vote with a tiny lead.

  • ICM (online) 54%
  • Panelbase (online) 49%
  • ICM (phone) 49%
  • TNS (face to face) 49%
  • YouGov (online) 48%
  • Opinium (online) 47%
  • Survation (online) 47%
  • Survation (phone) 46%

If we ignore undecided voters, then judging from the last US presidential election when Nate Silver proved preponderance and clustering more important than margins-of-error which purportedly showed the election "too close to call", one might assume the "No" vote will carry the day.

I sided with Silver and called for an easy electoral college blowout, and that is precisely what happened.

But this is Scotland not the US, the undecided voters are many, and this is an overall vote not a state-by-state electoral college total.

Which way the undecideds break will determine the outcome.

Stiglitz vs. Krugman on Scotland

Bloomberg reports Scots Independence Campaign Nears Climax as Polls Diverge.
Activists were out in force across Scotland during the final weekend before the Sept. 18 ballot that might trigger the breakup of the union after more than three centuries. With opinion polls showing contradictory findings, both the “yes” and “no” campaigns said they were poised to win, introducing further uncertainty to financial markets fixed on Scotland.

Scottish First Minister Alex Salmond, the head of the pro-independence campaign, and Alistair Darling, the former U.K. chancellor of the exchequer who fronts the Better Together group, reprised arguments today over the economy, the pound and state-funded health care if Scots back independence. With the debate increasingly polarized, the focus now is on appealing to undecided voters in the final three days of the campaign.

“Independence may have its costs, although these have yet to be demonstrated convincingly; but it will also have its benefits,” Joseph Stiglitz, the Nobel laureate economist who was part of a panel that advised Salmond, said in an op-ed published in the Glasgow-based Sunday Herald newspaper.

Stiglitz, in his op-ed, cast doubt on the assertions made about Scotland post-independence, singling out fellow Nobel laureate Paul Krugman’s comments about economies of scale.

“By an order of magnitude, far more important than size is the pursuit of the right policies,” said Stiglitz. “There is, in fact, little basis for any of the forms of fear-mongering that have been advanced.” Stiglitz or Krugman?

Both Stiglitz and Krugman are Nobel Prize winning economists. I seldom side with either of them. In this case they take opposite views, so one of them must have the better argument.

Stiglitsz is the clear winner. Economies of scale don't matter if the underlying policies are inefficient.

Scotland would have the chance to come up with its own corporate tax policies that would eventually attract far more businesses and jobs than the alleged financial jobs it would lose if it votes for independence.

That said, given the Labour party dominates Scotland, it is highly debatable whether Scotland would make the right corporate tax policies (but at least they would have a chance). And over time, voting preference can change.

Cameron Scared, UKIP Delighted

Moreover, and what probably has Cameron and Labour scared half to death, is that a "Yes" vote strongly increases the odds the UK leaves the EU.

Why?

This has not been widely discussed in mainstream media, but those Labour votes vanish from UK parliament and from UK in general. As a result UKIP and the anti-EU vote would get a big boost. That would be a good thing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
Kategorie: Najnowsze feedy

Toothless Barking Dogs; Don't Like the Rules? Then Ignore Them: French Style

nie., 14/09/2014 - 09:05
Don't Like the Rules? Then Ignore Them: French Style

When it comes to fiscal policy in the EU, you can break whatever fiscal rules you want, provided you are big enough.

France qualifies, so does Germany. If you are small like Greece and Cyprus, then you may find yourself in bed with the Troika.

For the third time France Warns of Budget Overshoot France has declared it will heavily overshoot its already twice-delayed budget deficit target next year, setting up tough negotiations with European partners previously reluctant to grant Paris more time to bring its public finances within EU limits.

Michel Sapin, finance minister, announced that the required deficit target of 3 per cent of national output was being pushed back a further two years to 2017 in the latest sign of the deep-seated economic problems confronting President François Hollande and his socialist government.

Mr Sapin said the deficit would reach 4.3 per cent of gross domestic product in 2015 after a level of 4.4 per cent this year – the latter also a big overshoot of earlier estimates and the first annual rise in the deficit for several years.

He blamed the situation on the slow rate of economic growth and low inflation, saying France demanded that the EU “collectively take into account” an economic slump “unprecedented in recent European history”.Joke of the Day

The German finance ministry said: "We assume that all member countries of the eurozone stick to the rules. Otherwise we risk our credibility."

Credibility? What credibility? How can anyone speak about credibility when France , Spain, and Italy miss deficit targets over and over and over again?

Toothless Howling Dogs

Like toothless howling dogs, Eurozone Leaders Warn on Fiscal Rules, shortly after the French budget announcement. Eurozone leaders warned the currency bloc risks facing a new market backlash if it strays from its fiscal rules, an apparent message to France and Italy that their push for more flexibility will be viewed sceptically when they submit their budgets to Brussels next month.

The admonition, from leaders of the European Commission, European Central Bank and eurozone finance ministers, came just 48 hours after the French government announced it would blow through the EU’s budget deficit limit of 3 per cent of economic output next year. Instead, Paris projected a 4.3 per cent deficit.

EU officials said ministers from smaller countries who have already implemented tough reforms complained during a closed-door session that any loosening of the rules now would be seen as double standards.

The debate over how much flexibility the European Commission will allow Paris and Rome threatens to become one of the most contentious political issues facing the EU. An Italian-led group of struggling economies has pushed for the rules to be interpreted leniently, arguing the lack of public spending is exacerbating what is threatening to become a triple-dip recession.

In a tweet on Thursday, Matteo Renzi, Italy’s prime minister, said his country did not “expect to be lectured by EU,” calling for a swift implementation of a €300bn investment plan mooted by the new European Commission president Jean-Claude Juncker.

As part of a push to stimulate growth, Mr Draghi last week announced a plan to purchase asset-backed securities held by eurozone banks. He also urged national governments to guarantee the riskier portions of the securities to free up cash for loans to consumers and businesses.

Both France and Germany have indicated they oppose such government guarantees, however, and Mr Dijsselbloem said the Netherlands, where banks hold significant quantities of mortgage debt, would also not guarantee such purchases. Expect Nothing But Howls

Will the EU do anything about France? Other than yapping and shifting deficit timelines "for the last time" the answer is the same as always: Of course not.

And will France, Germany, and the Netherlands do what the ECB wants in regards to guaranteeing debt? Apparently not, and they would be foolish to do so.

Will there be any major stimulus efforts like France and Italy want? No again. Germany and the Netherlands won't go along.

Instead, expect all the dogs to remain seated in a big circle, howling at each other as well as the moon, without giving the slightest look at one of the basic problems, the euro itself.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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China Industrial Growth Slows, Power Generation Negative 1st Time in 4 Years; Stimulate Now, Crash Later

sob., 13/09/2014 - 19:46
Cries for more stimulus ring loudly in China because Chinese industrial output slowed to 6.9%. That is a number that any country in the world would be more than pleased with, but China's target is 7.5%.

Why 7.5%? In fact, why should there be any targets at all? The economy is not a car that can be steered by bureaucrats to perfection.

Nonetheless, Calls Grow for More Stimulus, as China August Factory Growth Slows to Near Six-Year Low.
China's factory output grew at the weakest pace in nearly six years in August while growth in other key sectors also cooled, raising fears the world's second-largest economy may be at risk of a sharp slowdown unless Beijing takes fresh stimulus measures.

Industrial output rose 6.9 percent in August from a year earlier - the lowest since 2008 when the economy was buffeted by the global financial crisis - compared with expectations for 8.8 percent and slowing sharply from 9.0 percent in July.

"The August data may point to a hard landing. The extent of the growth slowdown in the third quarter won't be small," said Xu Gao, chief economist at Everbright Securities in Beijing.

Some analysts believe annual economic growth may be sliding towards 7 percent in the third quarter, putting the government's full-year target of around 7.5 percent in jeopardy unless it takes more aggressive action. Experts reckon output growth of around 9 percent would be needed to attain such a goal.

Reinforcing the tepid economic activity, China's power generation declined for the first time in four years, falling 2.2 percent in August from a year earlier, and pointing to slackening demand from major industrial users.

Jiang Yuan, a senior statistician with the bureau, said the dip in August factory growth was due to weak global demand, especially from emerging markets, and the slowdown in the property sector that hit demand for steel, cement and vehicles.

The last time China suffered a "hard landing" was during the height of the global crisis, when economic growth tumbled to 6.6 percent in early 2009. That is far short of the near collapses which loomed over some developed economies, but still threw tens of millions of Chinese out of work, alarming the Communist Party's stability-obsessed leaders into action.China's Economic Numbers

  • Industrial Output: +6.9%
  • Power Generation: -2.2%
  • Retail Sales: +11.9%
  • Fixed Asset Investment: +16.9%
  • Mortgages issuance: -4.5%

End of the Line for China's Growth

That set of numbers should raise concerns about overheating, not worries over economic slowdowns.

Yet, "The government must take forceful policy measures to stabilize growth," said Li Huiyong, an analyst at Shenyin & Wanguo Securities in Shanghai.

It's time to be realistic. China cannot and will not grow at 7% forever.

Stimulate Now, Crash Later

Calls for more stimulus with the above set of numbers is beyond ridiculous given China's vacant malls, massive pollution problems, unused rail lines, reckless investment in SOEs, and even entire vacant cities.

Malinvestment is already rampant. Additional stimulus now to meet arbitrary growth targets will cause a crash later. China will be lucky to average 2% growth for a decade. Outright contraction in some years is not out of the question.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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"Yes" Makes 100% Perfect Sense for Scotland; Too Close to Call; Strange Bedfellows

sob., 13/09/2014 - 09:44
Scotland Vote Too Close to Call

Here's some good news for those rooting for Scottish independence:

In spite of a massive fearmongering campaign by both Labour and Tories in the UK, Scots Independence Race Tightens Six Days Before Ballot.
Scotland’s nationalists drew closer to the Better Together campaign in the latest poll on independence before the referendum, making the run-in to the Sept. 18 vote too close to call.

The poll of 1,000 people for the Guardian newspaper yesterday put support for “yes” on 49 percent and “no” on 51 percent after excluding undecided voters. It is the fourth poll in a week to put the “yes” side within the 3 percent error margin of victory. Only one of those has had the pro-independence side ahead.

Women vs Men


Women backed staying in the U.K. by 55 percent to 45 percent, while men favored independence by 52 percent to 48 percent.

Royal Bank of Scotland Group Plc was among lenders to announce contingency plans this week to move some operations out of Scotland in the event of a “yes” vote. Salmond demanded a probe into the disclosure, first reported by the BBC citing a Treasury source, accusing the government of deliberate “scaremongering” by briefing sensitive information before the referendum.

Utter Nonsense

Business leader, Tim Martin, the chairman of pub chain JD Wetherspoon Plc (JDW), was dismissive of warnings from businesses about the costs of independence. “Most of what has been said has been utter nonsense,” he told BBC Radio.

“New Zealand has got a similar population to Scotland, its own currency and it does tremendously well; Singapore -- fantastic economy, only 2 or 3 million people; Switzerland does very well,” he said. “There’s obviously no reason why Scotland can’t have its own government if that’s what the Scots want.”"Scotland Better Off On Its Own

In response to RBS, 4 Other Banks Warn of Relocation to England if Scots Vote Yes; Catalans Stage Mass Protest for Independence Pater Tenebrarum at the Acting Man blog pinged me with this pertinent comment:

"Scotland will be better off on its own. It matters not one whit where these companies are headquartered. In fact, an independent Scotland would be able to introduce a regulatory and tax regime that makes it irresistible to foreign companies."

Bingo!

    1. The EU is concerned that Scotland may lower corporate taxes and pull business from elsewhere.
    2. Labour is concerned about the loss of Labour votes in the UK parliament.
    3. Spain and the EU are concerned that a Scotland "yes" vote for independence will cause Catalans to do the same.
    4. Cameron is worried that he may actually have to put a British EU exit to vote if "Yes" passes.

      Strange Bedfellows

      Politics makes strange bedfellows and the above four points show why.

      "Yes" Makes 100% Perfect Sense for Scotland

      Scotland has far better opportunities on its own. Any loss in business of financial industries could easily be regained elsewhere.

      The only caveat is that Scotland would have to implement tax reforms to make that happen.

      Regardless, the success or failure of independence would be up to the Scots as it should be.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      Undeclared War on Russia; Solidarity by Force; Ruble Falls to Record Low; Sanctions Target Private Companies

      pt., 12/09/2014 - 20:51
      Sanctions or War?

      It's long overdue we label sanctions for what they really are: war. If you prefer, call them "economic war".

      Today, president Obama took the undeclared war another step forward by targeting Lukoil, a private Russian company.

      Please consider Gazprom, Lukoil Hit in New Round of Sanctions.
      The US dramatically expanded its sanctions against Russia on Friday by adding Gazprom, Europe’s leading energy provider, to the list of targeted companies, as it sought to ratchet up pressure on Moscow to step back from the war in Ukraine.

      The latest measures targeting energy, financial services and defence industries also included Lukoil, the privately owned oil group, and Sberbank, Russia’s largest bank.

      In addition to blocking most major state-owned groups from western capital markets, the US has also tightened restrictions on some of Russia’s largest energy projects, a key engine of its future economic growth.

      One in particular – ExxonMobil’s high-profile exploration partnership with the state-controlled Russian oil group Rosneft in the Russian arctic – is looking increasingly under threat. The two companies began drilling in the Kara Sea last month, but industry analysts question whether their joint venture can survive under the intensifying sanctions regime.

      There was also surprise that the US had decided to sanction Lukoil, the first private Russian company to be penalised in this way. The oil producer is not tied to President Putin and has played no role in the Ukraine conflict.

      “It sends a message that any Russian firm is now conceivably a fair target instead of solely targeting firms that are state-owned or owned by people believed to be associated with President Putin,” said Andrew Weiss, vice-president for studies at the Carnegie Endowment for International Peace.

      A senior administration official said that the latest round of sanctions could be lifted immediately if Russia observed the ceasefire agreement signed with Ukraine in Minsk last week.Ceasefire Nonsense

      Notice how the US is only interested that the rebels not  violate the ceasefire.

      Moreover, the fact is the ceasefire has largely held, and it has been broken by both sides. It's not even clear who broke the ceasefire first.

      But if it was the rebels who broke the ceasefire in every instance, one would have expected the US state department to be all over the story with bullhorns.

      Solidarity by Force

      President Obama says We will join EU in intensifying sanctions on Russia.

      Yeah right. We twist the EU's arm till they "cry uncle" then we claim we join them.

      Unless the intent is to provoke a military war with Russia, this new round of sanctions is stupider than any of its predecessors.

      If Exxon cannot partner with Rosneft in the Russian arctic, guess who will? Try China.

      Ruble Falls to Record Low vs. Dollar



      Sanctions may be hurting the Ruble, but so are falling energy prices.

      Reflections on the Global Economy

      The price of oil has been falling in spite of this mess. That's a big hint that the global economy is in a huge slowdown.

      And that drop in oil price likely hurts Russia more than any of these sanctions.

      Like oil, copper says the same thing: World Growth vs. Copper with 3-Month Lag; Iron Sinks to 5-Year Low; US Will Not Decouple.

      For a wrapup on sanction madness, please consider Fishing for Trout With Rope and Mashed Potatoes; Mentality of Jackasses; Gas Pains.

      Expect a big "surprise" to the downside for global GDP as sanctions can only compound the already evident weakness.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      RBS, 4 Other Banks Warn of Relocation to England if Scots Vote Yes; Catalans Stage Mass Protest for Independence

      pt., 12/09/2014 - 08:12
      Tale of Two Countries

      Fearmongering in Scotland hits fever pitch as RBS and four other banks threaten to leave the country if Scotland votes "Yes" for independence.

      In Spain, Catalans staged a huge protest in favor of independence. The Spanish government hopes Scotland will vote "No" even though it seeks to halt a Catalan vote altogether.

      Let's take a close look at these stories starting with Scotland.

      RBS, 4 Other Banks Warn of Relocation to England if Scots Vote Yes

      On the fearmongering front, RBS warns it would relocate to England if Scots vote Yes.
      Royal Bank of Scotland led a host of banks employing more than 35,000 people in Scotland who warned that they would relocate their headquarters south of the border in the event of a Yes vote in the Scottish independence referendum next week.

      “RBS believes that it would be necessary to re-domicile the bank’s holding company and its primary rated operating entity (The Royal Bank of Scotland plc) to England,” it said in a statement on Thursday.

      The move, which followed a similar announcement from Lloyds Banking Group on Wednesday, was swiftly echoed by Clydesdale Bank, TSB Bank and Tesco Bank, which all individually confirmed they would set up London-based entities if Scotland voted to leave the UK.

      The recently floated TSB Bank, which has more than a quarter of its loans north of the border, said it planned to move its main high street banking subsidiary’s domicile from Edinburgh to London. TSB’s parent company and head office are already all in London, but it has more than 2,000 staff in Scotland, out of a total of 8,000.

      “Although the implications of Scottish Independence remain unclear, it is likely that in the event of a Yes vote, TSB will establish additional legal entities in England,” it said, adding that it expected there to be enough time between a Yes vote and the start of independence to implement any changes.

      With some polls showing the two sides neck-and-neck a week before the vote, business leaders have become more outspoken about the impact of a Yes vote. Retailer Next said on Thursday it feared that independence would push up prices in its stores north of the border.

      Sir Charlie Mayfield, chairman of John Lewis, said independence could force the retailer to adopt a different pricing regime in Scotland due to potential currency and tax changes.

      The announcements came after a co-ordinated effort by the Better Together campaign, the Treasury and Number 10 to persuade businesses to speak up in favour of the union. On Thursday morning, more than 100 Scottish business leaders jointly signed a letter organised by Better Together urging Scots to vote No, arguing that the economic risks of separation were not worth taking.

      Standard Life, the FTSE 100 insurer that is one of the largest employers north of the border, said on Wednesday that it was planning to shift large parts of its business out of the country if Scotland voted for independence. “This transfer of our business could potentially include pensions, investments and other long-term savings,” it said.20 Point "No" Lead Vanished

      This one is close. Hopefully Scotland does the right thing and votes for independence. In the wake of a fever-pitch fearmongering effort by Cameron, banks, and others, it's hard to say.

      The only reason Cameron allowed this vote in the first place is because he thought it was a guaranteed proposition. The "No" voters once had a 20-point lead in the polls.

      Mass Protest in Barcelona

      Meanwhile, in Spain, Catalans stage mass protest in Barcelona to back referendum
      The Catalan independence movement held a mass rally in Barcelona on Thursday as part of an intensifying campaign in support of a planned November referendum on the region’s future political status.

      Dressed in red and yellow, the colours of the Catalan flag, hundreds of thousands of protesters assembled on Gran Via and Avenida Diagonal, two of the city’s main arteries. Seen from the air, the rally formed the shape of a giant V, described by organisers as a symbol of Catalonia’s desire to vote.

      The Catalan demonstration was staged a week before Scotland’s independence referendum, and less than two months before the planned plebiscite in the Spanish region. The Spanish government has said repeatedly that it will not allow the Catalan vote to go ahead, arguing that the country’s constitution allows no space for regional self-determination.

      The constitutional court is set to rule on the issue in the weeks ahead, and is widely expected to side with Madrid. Catalan leaders will then have to decide whether to press ahead with their ballot or comply with the court ruling and develop an alternative strategy.

      Speaking hours before the demonstration, Artur Mas, the Catalan president, renewed his calls on Madrid not to stand in the way of the November vote. “The message [today] is, ‘We want to vote. We are a nation. We want to decide our own political future.’”Let the Voters Decide

      Why shouldn't the Catalan voters, like Scottish voters, get to decide their own fate?

      The only apparent answer is Spain knows full well they would vote for independence. Had Cameron realized the vote in the UK would have been this close, I rather doubt he would have allowed it.

      Yet, as I have stated before, it's far better to settle such issues by vote than by civil war.

      For further discussion, please see Will Tears and Promises Save the Day for the "No" Vote for Scotland? Lesson for Ukraine: Voting is Better than Civil War.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      Fishing for Trout With Rope and Mashed Potatoes; Mentality of Jackasses; Gas Pains

      czw., 11/09/2014 - 22:46
      The EU stepped up its sanctions today after forcing all the ducks in line with the position of president Obama. Russia immediately responded in kind with actions on cars, clothes, and energy.

      The Financial Times reports Russia Threatens to Cap Western Car and Clothing Imports.
      Russia threatened to escalate a growing trade dispute between the Kremlin and the EU, saying it could cap western car and clothing imports.

      The fresh warning came as EU diplomats ended a week-long deadlock on Thursday over a new round of sanctions against the Kremlin, and agreed to trigger measures to block Russia’s largest state-owned oil companies from raising money on European capital markets.Forcing Ducks In Line
      The measures were due to go into effect at the start of the week, but several EU countries balked, arguing they needed more time to assess whether the Kiev-brokered ceasefire would take hold.

      Diplomats said the decision by EU ambassadors to press ahead came after Herman Van Rompuy, the European Council president, held a conference call on Thursday with the leaders of the four European countries in the Group of Seven leading industrialised nations – Germany’s Angela Merkel, France’s François Hollande, Britain’s David Cameron and Italy’s Matteo Renzi – to finalise the measures.Russia's Response
      Speaking after the EU announcement, Vladimir Chizhov, Russia’s permanent representative to the EU, told Russian newswires: “Russia has no other choice but to go for certain countermeasures.” Russia Tightens Gas Supplies to Poland

      Also consider Russia Tightens Gas Supplies to Poland.
      Poland’s state gas group PGNiG said on Wednesday that Gazprom had delivered 20 per cent less gas on Monday and 24 per cent less gas on Tuesday than it was contracted to supply. Kiev confirmed Poland had been forced to stop re-exports to Ukraine in response to these cuts.

      Igor Prokopiv, head of Ukraine’s gas pipeline operator, confirmed the knock-on effect in Ukraine.

      “At 2pm Poland stopped reverse gas flows to Ukraine which had been in the range of 4m cubic metres,” he told journalists in Kiev. “Today Poland put in an order for 11 mcm a day, and Russia confirmed orders for 7mcm. Those 4mcm are our reverse flows.” 

      Energy supplies are one of Ukraine’s most serious vulnerabilities. It is one of the world’s least efficient energy consumers and its supply crunch is being compounded by falling coal production in the Donbass region, which has been affected by conflict. Ukraine needs to import about half of its consumption of about 50 bcm annually and analysts reckon it would be hard to weather the winter without imports of 5bcm to 10bcm

      The volumes of reverse-flows are modest in comparison with Ukraine’s needs. Slovakia is exporting some 21 mcm/d, Hungary can supply 16 mcm and Poland can send 4 mcm. Priorities vs. Solidarity
      Ukraine complained last month that reverse flows were running at far less than potential capacity; Hungary for example is sending only about 3 mcm, because its priority is to fill its own storage facilities in readiness for a stand-off with Russia. Gas Pains

      The above statements sum up the position quite nicely, don't they? In essence it's a big F*You to Ukraine.

      Better Ukraine to be totally without gas than for the rest of Europe to suffer from any gas pains.

      Sanctions Never Work

      As a result of previous sanctions, and counter-sanctions fruit is rotting in the fields, and European GDP is under pressure. Please consider


      Small Price Theory

      Who cares if history says sanctions don't work? Who cares if a recession ensues? Not to worry, it's a "small price to pay" say sanction supporters.

      I encourage everyone to read my previous discussions on the absolute silliness of the "small price" theory.


      Air Flight Restrictions

      On September 8 I noted Russia threatens to block commercial air traffic over Russian airspace. Costly re-routes on the way. See EU Threatens New Sanctions; Russia Responds with Threats on Natural Gas and Airspace Flight Restrictions.

      Mentality of Jackasses

      In the above article I commented ...
      Why EU and US economic-jackasses think sanctions will accomplish anything positive or change Russia's behavior one bit is at first glance a bit of a mystery.

      However, economic-jackasses by definition are going to do stupid things, so we should expect more and more of the same failed tactics.Reader Terry responded "I’m astounded that you, a libertarian, belittle the EU for economic sanctions. The EU has nothing but economic sanctions to make Russia pay any kind of price for invading its neighbors."

      Sanction Irony - Putin's Popularity Hits 87%

      I am amused by the silliness of Terry's comment. For starters, no Libertarian would ever be in favor of sanctions. 

      Invariably, the average citizen ends of paying the price. And that holds true for both sides.

      Time Magazine explains how sanctions really work: Putin’s Popularity Soars to 87% in the Face of Adversity

      Expect Putin to cave in on account of sanctions? Think again. The bigger the sanctions, the greater the hardships on those who impose them.

      Nonetheless, the EU and President Obama want to "do something". So they do. And to get support, they flash the "patriotism card". Unthinking sheep fall in line every time.

      Fishing for Trout With Rope and Mashed Potatoes

      In spite of the fact that sanctions are counterproductive, the "EU has nothing but sanctions to try" so that's what they do. Next, mainstream media parrots fall in line. Ultimately,  and under the guise of patriotism, the sheep and ducks fall in line as well.

      The sanction approach is similar to fishing for trout with rope and mashed potatoes because that's all you have to fish with.

      Actually, sanctions are far worse.

      Fishing for trout with mashed potatoes and rope only wastes time and potatoes. Sanctions waste more time, a tremendous amount of money, and the bigger the sanctions, the greater the loss of jobs and economic output.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      Don't Like the Rules? Then Ignore Them: Shoot First, Ask Questions Later

      czw., 11/09/2014 - 21:01
      In politics, if you don't like the rules, you ignore them. This philosophy only works if you are big enough and powerful enough to get away with it. I have some recent examples.

      Shoot First Ask Questions Later

      The Guardian comments Obama's Legal Rationale for Isis Strikes: Shoot First, ask Congress Later.
      For expanded Isis strikes, president relies on legal authority he disavowed only a year ago. Obama said he would welcome congressional support but framed it as optional, save for the authorisations and the $500m he wants to use the US military to train Syrian rebels.

      Yet one of the main authorities Obama is relying on for avoiding Congress is the 2001 wellspring of the war on terrorism he advocated repealing only last year, a document known as the Authorization to Use Military Force (AUMF) that few think actually applies to Isis.

      Taken together with the congressional leadership’s shrug, Obama has stripped the veneer off a contemporary fact of American national security: presidents make war on their own, and congresses acquiesce.

      The constitution envisions the exact opposite circumstance.  More Obama Examples 

      Changes on the fly to Obamacare? Hey, why not? Who is going to stop him?

      Immigration rule changes? Why not?

      It matters not that Obama would be overstepping his bounds in a matter that should be left to Congress. It matters not that Only 26% in Favor of Obama's Amnesty Plan for Illegal Immigrants.

      Republicans and Democrats Alike

      It's not just Obama. Bush and Cheney wanted a war with Iraq so they lied to get one. Some $3 trillion later, many warmongering fools still think Bush was correct. Yet, we are now fighting in Iraq for the third time as a result.

      FDR Burns Crop, Confiscates Gold

      FDR confiscated everyone's gold and burned farmers' crops, two of many blatantly illegal, even treasonous acts by FDR. He is revered by Keynesian economists for breaking the law because he got away with it and they believe it worked. (It didn't).

      End analysis says that if presidents think they can get away with it, they do what they want. Constitution be damned.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      53% of Chinese Expect War With Japan

      czw., 11/09/2014 - 08:59
      Even with battles over energy, disputed islands, and recent militarism by Japan, one might not have expected this polling result: Majority in China Expect War with Japan. China and Japan are heading towards military conflict, according to a majority of Chinese surveyed on ties between the Asian powers in a Sino-Japanese poll.

      The Genron/China Daily survey found that 53 per cent of Chinese respondents – and 29 per cent of the Japanese polled – expect their nations to go to war. The poll was released ahead of the second anniversary of Japan’s move to nationalise some of the contested Senkaku Islands in the East China Sea.

      Relations between Japan and China have soured since Japan bought three of the tiny islands – which China claims and calls the Diaoyu – in 2012. Japan defended the move as an effort to thwart a plan by the anti-China governor of Tokyo to buy them, but China accused it of breaching an unwritten deal to keep the status quo.

      According to the poll, 38 per cent of Japanese think war will be avoided, but that marked a nine point drop from 2013. It also found that a record 93 per cent of Japanese have an unfavourable view of their Chinese neighbours, while the number of Chinese who view Japanese unfavourably fell 6 points to 87 per cent.Energy Production

      Given global restraints on the production and use of energy, my view is that it is impossible for China to keep growing 7% a year as most expect.

      I believe China will be lucky to grow 3% on average for the next decade.

      Questions of the Day

      • If China attempts to maintain 7% growth for another decade, where will the energy resources come from?
      • If China doesn't maintain high growth, what about mounting Chinese unrest due to lack of jobs?
      • What happens when Abenomics fails?
      • What about US, EU, and Japanese pushes for higher inflation even though wages don't keep up?
      • What about Ukraine and the US-EU feud with Russia?
      • What about ISIS?
      • What abut Syria?

      My point? The global economy is a tinderbox, waiting for a catalyst to explode.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
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      Will Tears and Promises Save the Day for the "No" Vote for Scotland? Lesson for Ukraine: Voting is Better than Civil War

      śr., 10/09/2014 - 20:55
      A recent poll showed support for a "Yes" vote for Scotland independence went into the lead for the first time, overcoming a 20 percentage-point deficit.

      This set off a flurry of activity including ...

      1. An emotional "I would be heartbroken" plea by UK prime minister David Cameron
      2. A tearful speech by former prime minister Gordon Brown
      3. Fearmongering tactics by both sides
      4. Promises of more political independence for Scotland

      Did it work?

      "No" Vote Leads 53-47 Excluding 10 Percent Undecided

      In the wake of the above tactics Scottish Independence Support Fades.

      When taking into account all respondents, 42 percent said they would vote Yes, up 1 point, and 48 percent said they would vote No, unchanged. Ten percent said they were undecided how they would vote in the Sept. 18 referendum.

      With 10 percent undecided this vote can still go either way.

      Gordon Brown Close to Tears

      The Telegraph reports Gordon Brown Close to Tears in Emotional Defence of UK-wide NHS.
      Gordon Brown came close to tears as he spoke about his daughter's death in a passionate speech rallying against the SNP's healthcare "lie".

      The former prime minister's voice cracked as he cited how NHS [National Health Services] staff saved his sight and nursed his baby daughter in hospital as he professed a "love" for public health care.

      In a surprisingly personal address to Labour activists in Glasgow, Mr Brown used his NHS connections to dismiss the idea that Scotland's health service is slipping towards privatisation under Westminster rule.

      In 2002, while Mr Brown was Chancellor, his baby daughter Jennifer Jane died in an Edinburgh hospital. She was just 10 days old.

      "I love Scotland. I love the National Health Service. I was born into the National Health Service. I grew up in the National Health Service," Mr Brown said.

      The issue, played up increasing over the last month by the Yes campaign, is considered one of the key reasons why Labour voters appear to be switching en masse from No to Yes. Spotlight on Socialized Healthcare

      To help explain the above tearjerker speech, consider the following Obamacare analogy: Part of the "Yes" campaign was a claim that the Tories, would end UK's version of Obamacare.

      Scotland is predominately Labour. In general, Scottish voters do not like the Tories or prime minister David Cameron. They do want socialized healthcare, and they also want more independence, especially on fiscal issues.

      More Power to Scotland and England

      No party in power is willing to give it up. Yet, the Tories in England want to do something to help keep Scotland in the UK.

      The solution is to give everyone more power. How does that work?

      The Financial Times explains Tory MPs to demand more powers for England.
      Conservative politicians are mobilising to demand a proper settlement for English voters after the three main political parties pledged to hand more powers to the Scottish parliament.

      John Redwood said more than 100 colleagues were backing his campaign to ensure that England was also given more powers – and even its own parliament separate to Westminster – as part of the settlement promised this week by all three party leaders in an attempt to convince Scots to reject independence in next week’s referendum.

      “We need English votes for English issues and well over 100 of my colleagues think we need to do something for England,” said the former Welsh secretary.

      “Yes or No, we are going to have a different country after 2016. If Scotland stays in, it is going to be a looser federation and there has got to be a strong English government to match a strong Scottish government. There has to be fairness in this settlement.”

      The push comes amid mutterings of discontent among many Tories over their leadership’s decision to offer the Scots greater devolution in return for staying part of the UK. With all three parties this week pulling together in a last-ditch No campaign, those tensions began to surface on Wednesday during Prime Minister’s Questions.Cameron's "Heartbroken" Plea

      Let's wrap up the independence tactics with a look at Cameron's Impassioned Plea to Voters.
      On a hastily arranged campaigning visit to Edinburgh, Mr Cameron confronted the prospect of a Yes vote and said that such a verdict “would have to be respected by the rest of the United Kingdom”.

      Just as Gordon Brown appeared tearful at a No rally on Tuesday, Mr Cameron seemed upset during moments in his speech. “I would be heartbroken if this family of nations was to tear apart.”

      Mr Cameron’s speech to financial services workers in a modern office block was in a controlled environment, once again avoiding the risk of a street confrontation with Yes supporters.

      Mr Cameron also repeated his warning that Scotland would be worse off with potentially higher taxes and lower public spending if it left the union.

      His visit coincided with separate speeches by Ed Miliband, Labour party leader, and Nick Clegg, deputy prime minister and leader of the Liberal Democrats.

      Mr Miliband told an audience he wanted “to make the case about why I think the right thing to do is to vote for No. And for Scotland to stay in the United Kingdom, head, heart and soul”.Cameron's Appeal to Financial Service Workers

      Inquiring minds may be wondering why Cameron appealed to financial services workers. The answer is he was appealing to his own group. That set of voters tends to be conservative.

      The financial services workers are afraid they will lose their jobs if more services head to London in the wake of a "Yes" vote.

      Voting Better than Civil War

      Regardless of how one feels about the campaign tactics that include fearmongering, tears, and heartbroken pleas, the entire process is sure a hell of a lot better than the civil war in Ukraine.

      The genuine heartbreaks in Ukraine including death and property destruction are many orders-of-magnitude greater than any alleged heartbreaks over Scotland.

      There easily could have been a peaceful solution in Ukraine if following the Maidan overthrow, there would have been votes for each of Ukraine's regions. Instead, and following the advice of the US and EU, Kiev Poked Sticks at Bears and Hornets.

      Without a doubt, this is a very sad lesson for Ukraine. Ironically, the civil war may lead to the exact same political independence solution.

      And given the proposed Catalan independence vote (see Scotland Independence Frustrates Spain Prior to Catalonia Referendum), this is a lesson for Spain as well.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
      Kategorie: Najnowsze feedy

      World Growth vs. Copper with 3-Month Lag; Iron Sinks to 5-Year Low; US Will Not Decouple

      śr., 10/09/2014 - 09:32
      Copper is frequently cited as a leading indicator of economic activity because of its widespread use in many sectors of the economy, from homes and factories, to electronics and power generation and transmission.

      For that reason, some call it "Dr. Copper".

      Inquiring minds may be wondering what copper has to say about future economic growth. The following charts will explain.

      World Growth vs. Copper



      Copper Daily Chart



      The above charts courtesy of Steen Jakobsen, chief economist at Saxo Bank.

      Iron Ore Down 38% this Year

      China is slowing and its property bubble is under severe pressure. But it's not just copper that is under pressure.

      Iron has taken a big hit, and iron producers are under severe stress.

      Reuters reports Iron Ore Price Plunge Claims First Australian Casualty. Plunging iron ore prices have dealt their first blow in Australia, sending fledgling miner Western Desert Resources Ltd into administration after it failed to reach a deal with bankers over its debt.

      Western Desert was caught out by a move by the world's top four iron ore producers to flood the market with low-cost supply, outpacing Chinese demand growth for the steel-making ingredient and slashing iron ore prices by 38 percent this year.

      UBS estimated that even at present iron ore prices, smaller producers Atlas Iron Ltd, Gindalbie Metals Ltd and Grange Resources are all under water.

      Iron ore, which is priced in U.S. dollars, has sunk to a five-year low of $83.60. Australian miners have felt the impact even more as the Australian dollar has risen 5 percent against the U.S. dollar in that time.

      China imported 8.5 percent more iron ore in August than a year earlier, but imports for the year are expected to grow by only 49 million tonnes, well below the volume of extra supply, according to Australia's official forecaster.Expect China to Surprise on the Downside

      Iron is under pressure even with rising demand from China. What happens if future demand disappoints?

      I have been stating for quite some time that China is on the verge of a major slowdown and base metals would be affected, and so would the currencies of major commodity exporters like Australia and Canada.

      China cannot and will not grow at 7% a year as most expect. The consequences of that have yet to be felt.

      US Will Not Decouple

      Finally, those who think the US will decouple from this global mess are just as wrong as those who thought China would decouple from the global economy in 2008.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
      Kategorie: Najnowsze feedy

      Odds of Venezuelan Default Within 5 Years Hits 63%; Investors Realize Venezuela May Run Out of Money

      śr., 10/09/2014 - 02:30
      Venezuela has nice oil reserves but the government is spending more cash than it receives from pumping oil.

      Investors are finally starting to realize Venezuela may run out of money and will be forced to default on bonds.

      Please consider Venezuelan Bond Rout Deepens as Default Specter Raised
      Venezuelan debt traders are beginning to consider the possibility the country may run out of money.

      The cost of insuring the country’s foreign-currency bonds against non-payment soared yesterday by the most since the aftermath of Lehman Brothers Holdings Inc.’s collapse in 2008 to 14.25 percentage points, the most expensive in the world.

      While most analysts and investors expect Venezuela and its state-owned oil company to make $5.3 billion in bond payments coming due next month, concern is mounting the country may find itself without enough cash to service debt as soon as next year as foreign reserves drop to an 11-year low and oil prices sink. The nation’s notes tumbled yesterday after Ricardo Hausmann, a Venezuelan-born economist at Harvard University, questioned the government’s decision to keep paying bondholders in the face of shortages of everything from basic medicine to toilet paper.

      “The bond market is finally beginning to wake up” to the possibility of Venezuela defaulting, David Rees, an economist at Capital Economics in London, said by phone. He predicts the country could default as soon as this year.

      Venezuela’s bonds fell 4.4 percent yesterday, pushing the extra yield investors demand to own the nation’s debt instead of U.S. Treasuries to a six-month high of 11.95 percentage points, data compiled by Bloomberg show. The country’s notes now yield 3.31 percentage points more than debt from similarly rated Ukraine.

      The probability of Venezuela missing a payment on its bonds in the next five years rose four percentage points to 63 percent yesterday, according to traders in the credit-default swaps market. The cost of insuring Venezuela’s debt passed Argentina’s after that country missed a July 30 payment deadline, causing trading to be suspended. I have been talking about this possibility for quite some time and consider default on foreign-denominated bonds to be the baseline scenario.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.com Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
      Kategorie: Najnowsze feedy

      Average Workweek Back at Pre-Recession Levels: What About the Obamacare Effect?

      wt., 09/09/2014 - 20:45
      A chart of  hours worked shows the average work week has returned to pre-recession levels.

      Average Work Week



      Moreover, note that the number of part-time jobs has been relative steady in the recovery.

      Employed Usually Working Part Time




      What About the Obamacare Effect?

      The Obama administration uses the above charts to make the claim Obamacare did not lead to a reduction in hours worked.

      Obama is wrong.

      For detailed analysis, please consider The Worst Job Stat Continues To Get Even Worse by Jed Graham at Investor's Business Daily.
      Amid all the focus on boosting the minimum wage and legislating living wages, virtually no one seems to have noticed what is happening to the workweek in low-wage industries.

      Since December 2012, private industries paying up to about $14.50 an hour have added, on net, 972,000 nonsupervisory jobs with an average workweek of a mere 17.7 hours, an IBD analysis finds.

      That doesn't mean new employees are being hired for such few hours. Rather, it reflects a combination of reduced hours in existing jobs and short workweeks for newly created jobs.

      Overall, in these low-wage industries which employ 30 million rank-and-file workers, the average workweek shrank to 27.3 hours per week in July, an IBD analysis shows. That's the shortest workweek on record, except for this past February, when mid-month blizzards wreaked havoc during the Bureau of Labor Statistics survey week.

      The conventional wisdom among economists is that there's been no apparent shift to part-time work and that ObamaCare's employer mandate hasn't led to shorter workweeks.

      But shorter hours clocked by nonmanagers in low-wage industries are being obscured because the rest of the workforce is now clocking a longer average workweek than even before the recession started.

      For low-wage industry workers, on the other hand, the recovery in the workweek from a then-record low 27.5 hours in mid-2009 began to reverse in the latter half of 2012, and it's been pretty much all downhill since then.

      Evidence points to ObamaCare as an important factor in the shrinking workweek.Tale of Two Recoveries



      At first glance it may appear the above chart is in conflict with the chart of people usually working part time. However, there is no discrepancy.

      The BLS defines part time as less than 35 hours. Low wage industries had a lot of part-timers working 32 hours.

      Under Obamacare, the threshold of part-time jobs is 30 hours. Obama made that change on purpose to force more businesses to offer healthcare.

      Instead, busiunesses cut hours. It was the hours of the already part-timers that got cut, and that explains why there was no spike in part time employment.

      The Obamacare effect is very real as the above chart shows.

      Mike "Mish" Shedlock
      http://globaleconomicanalysis.blogspot.comMike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.
      Kategorie: Najnowsze feedy

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